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The Property Casualty Insurers Association of America (PCI), an industry association, urged US policy-makers to "ask important questions" regarding the impact that capital standards under development by the International Association of Insurance Supervisors (IAIS) will have on US insurers and policyholders in a statement responding to a joint industry letter sent to the members of the Senate Banking Committee on April 24. In the statement, PCI claimed the IAIS is attempting to impose "European-style" quantitative standards that are "unfair" to US insurers.
The IAIS is developing two capital standards, the Basic Capital Requirement (BCR) and Insurance Capital Standard (ICS), although some experts expect these to merge into one standard in the near future. The BCR will initially apply to global systemically important insurers (G-Siis). The ICS, meanwhile, will apply to all internationally active insurance groups.
Nat Wienecke, senior vice-president, federal government relations at PCI in Chicago, Illinois, says the agenda of the IAIS is being forced on the industry without the consent of the relevant insurance regulatory authorities.
Wienecke says because Dodd-Frank strictly limits the Federal Reserve's authority over insurers to those designated Sifis, any attempt to impose federally mandated capital standards on other insurance groups would be unlawful.
"Dodd-Frank gave the federal government very clear authority on what they could and could not do in insurance. Where it has no authority is over so-called IAIGs. This group doesn't exist under US law, and the federal government has no authority to regulate these insurers unless they are part of a bank holding company or a designated Sifi", he says.
US insurers themselves are monitoring international developments closely. One question raised by some is what powers a group-wide supervisor will have to impose a new global capital standard on insurers under their remit.
The IAIS is scheduled to complete work on the BCR by November this year. The ICS is due to be completed by year-end 2016.
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