06 October 2004

IUA calls for seamless global reinsurance regulatory environment

Reinsurance is, by definition, an international industry and must therefore be subject to a seamless global regulatory environment, delegates at the International Association of Insurance Supervisors (IAIS) annual conference heard this week.

International Underwriting Association Chief Executive Marie-Louise Rossi said that reinsurers must be able to trade cross-border without the expensive burden of complying with unnecessarily duplicated regulatory requirements. The conference is being held in the in the city of Amman, Jordan. During a panel discussion with regulators and industry representatives from the Middle East, European Union, London Market and United States, Ms Rossi outlined the IUA’s support for the principle of ‘mutual recognition’ in insurance and reinsurance supervision.

Under this approach, national regulators – once certain internationally standards have been agreed – recognise and accept the authority of their counterparts elsewhere. Thus, providing they comply with the rules issued by their own home state regulator, companies are free to operate internationally without having to adapt to the requirements of many other alternative regimes. “The goal of mutual recognition is to allow different regimes to maintain their own systems without stifling the business that supervisors are required to regulate,” declared Ms Rossi. “It is not about regulators all doing the same thing – it is about them agreeing to recognise that other regulators have attained appropriate standards and are imposing a satisfactory regime on the businesses they supervise.”

The IAIS was established in 1994 with the aim of setting international standards for insurance and reinsurance supervision and regulation. Ms Rossi said the effect of such principles must not be to make the international reinsurance trade more complicated and expensive. They should instead have a liberalising effect, lowering costs for insurers and for the ultimate consumers. She added: “Of course certain minimum standards must be met in order to establish confidence in the market. But regulation must meet the test of cost-effectiveness to the market, the overall economy and society. “I am pleased to see that the issue of mutual recognition is now firmly on the IAIS agenda.”

The IUA is keen to see IAIS principles or standards for potential mutual recognition agreements that are not prescriptive, but lay out broad areas for such agreements to cover. The actual framework and details of mutual recognition agreements can only be decided by the participating countries. The IAIS now represents insurance supervisory authorities in some 100 jurisdictions. In addition to its work on setting standards for regulation it promotes cooperation among authorities and coordinates work with regulators in other financial sectors.

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