NAIC Solvency Modernization Initiative Task Force Winter 2009 Meeting Features Florida Office Of Insurance Regulation Economist Ray Spudeck

Florida Office of Insurance Regulation Chief Economist Ray Spudeck served as a panelist for a Systemic Risk and Solvency Symposium hosted by the Center for Insurance Policy and Research in conjunction with the December 7, 2009 meeting of the National Association of Insurance Commissioners (“NAIC”) Solvency Modernization Initiative Task Force (“Task Force”). 

In his presentation, Dr. Spudeck, who was joined by co-panelists Dr. J. David Cummins of Temple University and Connecticut Insurance Commissioner Thomas Sullivan, described the evolution of the definition of systemic risk: 

At the request of the G20, the Financial Stability Board, the International Monetary Fund and the Bank for International Settlements jointly developed guidance for national authorities to assess the systemic importance of financial institutions, markets and instruments.  That guidance was published during October 2009 in a report entitled “Initial Considerations,” which developed a definition for systemic risk and identified three characteristics to assess systemic importance:  size, suitability and interconnectedness.

Dr. Spudeck also described recent activity conducted by the International Association of Insurance Supervisors (“IAIS”) in its examination of macroprudential tools and surveillance relating to systemically important financial institutions.

To view a summary of the  Systemic Risk and Solvency Symposium, which was held on December 3, click here.

 

Solvency Modernization Initiative Task Force and Working Group Reports

During the December 7 meeting, the Task Force heard reports from each of its Working Groups. To view the agenda and accompanying materials, click here.

Highlights of each Working Group discussion are included below:

Principles-Based Reserving Working Group

• A request from the Life and Health Actuarial Task Force to extend completion of the Valuation Manual to no later than the August 2010 national meeting was approved.
• Comments received regarding a draft memorandum on the NAIC’s role in the statistical agent process for the principle-based reserving needs were reviewed and will be incorporated in a forthcoming revision.

Group Solvency Issues Working Group

• Draft revisions to the Insurance Holding Company System Model Act, Insurance Holding Company System Model Regulation and Holding Company Best Practices reports were reviewed. Comments on these documents will be accepted until January 29, 2010.
• A draft memorandum to the Task Force regarding possible enhancements to U.S. group supervision will be available for comment until January 29 as well.
• An IAIS draft Guidance Paper on the Treatment of Non-Regulated Entities in Group-Wide Supervision will be available for comment until January 15.
• The Supervisory College and Methods of Cross-Border Communication Subgroup recommended that a survey be developed to forward to the states for feedback on an initial assessment of their laws compliance with the provisions of the IAIS Multilateral Memorandum of Understanding on Cooperation and Information Exchange.  A supervisory college tracking document whereby the NAIC would monitor the U.S. state insurance department participation and attendance at supervisory colleges for US insurers or groups engaged in insurance activity in multiple jurisdictions will be offered for a 30-day comment period.

International Solvency Working Group

• The Consultation Paper on Regulatory Capital Requirements and Overarching Accounting/Valuation Issues and the Consultation Paper On Corporate Governance and Risk Management will be available for comment until March 1, 2010

International Accounting Standards Working Group

• Discussion took place on the understanding that declarations from the March 2009 G20 meeting will result in U.S. state regulators being evaluated against the IAIS Insurance Core Principles and the IAIS standards in the future. One such core principle would deal with valuation.

To view the NAIC Solvency Modernization Initiative Web page, click here.  To access an overview of the Solvency Modernization Issue, click here.

 

Should you have any questions or comments, please contact Colodny Fass.

 

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