National Association Of Insurance Commissioners Conference Call Recap

A conference call of the National Association of Insurance Commissioners (“NAIC”) International Solvency and Accounting (E) Working Group (“Working Group”) of the Financial (E) Committee (“Committee”) took place on July 24, 2007.

The Committee interfaces with NAIC technical task forces and is the central forum and coordinator of NAIC solvency-related considerations with respect to accounting practices and procedures, blanks, valuation of securities, the Insurance Regulatory Information System (“IRIS”), financial analysis and solvency, zone examinations, examiner training, and issues concerning insurer insolvencies and insolvency guarantees.

The International Association of Insurance Supervisors (“IAIS”) has developed a number of principles, standards and guidance papers to help promote the global development of a common framework for the supervision of the insurance industry.  The Working Group, one of many comprising the Committee, met to solicit comments on three guidance papers for the IAIS Solvency Subcommittee. 

 

Guidance Paper on Enterprise Risk Management for Capital and Solvency Purposes

The Working Group first discussed the Guidance Paper on Enterprise Risk Management (“ERM”) for Capital and Solvency Purposes.  ERM involves the self-assessment of all reasonably foreseeable and relevant material risks that an insurer faces, along with their interrelationships. 

Accordingly, this paper focuses on the insurer as a single entity, and risk management as it relates to solvency assessment.  The Working Group reviewed this paper in its entirety and all comments were unanimously adopted.  In about one to two weeks, a new draft incorporating the comments will be circulated. 

The most recent draft of the Guidance Paper on Enterprise Risk Management for Capital and Solvency Purposes is attached for your review.

 

Guidance Paper on Capital Requirements

Capital requirements are a fundamental part of a solvency regime.  Sufficient capital is critical to an insurer’s ability to meet its obligations to policyholders and creditors, as well as finance future growth. 

As such, this paper provides guidance on the principles-based requirements for a solvency regime in relation to regulatory capital requirements.  It outlines the key features of a solvency regime and aims to support the enhancement, improved transparency, comparability and convergence of insurer solvency assessment internationally. 

The Working Group was only able to cover a portion of this paper at the meeting and decided that each member would individually review it and submit comments via e-mail.

The most recent draft of the Guidance Paper on Capital Requirements is attached for your review.

 

Guidance Paper on the Use of Internal Models by Insurers

Internal models assist an insurer in better integrating its risk and capital management processes and practices.  They may also be used in price setting or as part of an asset management function.  For these reasons, this paper focuses primarily on the insurer as a single entity and the use of internal models in this context.  Since the Working Group was unable to discuss this paper, it was decided that each member would review it individually and submit comments via e-mail. 

The most recent draft of the Guidance Paper on the Use of Internal Models by Insurers is attached for your review.

 

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