State and federal insurance regulators insist they will make sure U.S. regulatory standards aren’t being subsumed beneath a bid for international uniformity, though they will continue to strive for consensus as debate continues.
The regulators’ “international work is consensus-driven,” Michael McRaith, director of the Federal Insurance Office (FIO), told a packed audience recently during a panel discussion at the National Association of Mutual Insurance Companies (NAMIC) annual meeting outside of Washington, D.C. “What we need to do is work with our international counterparts to shape, influence and build consensus internationally to build best practices in a way that reflects our view on the subject.”
McRaith said that the end result “does not mean it will reflect our standards – it’s not the U.S. dictating to the rest of the world. “But we, as representatives in the process, work together to influence the outcome as much as we can.”
Former Sen. Ben Nelson, CEO of the National Association of Insurance Commissioners (NAIC), and its other leaders, have previously expressed concern that the international Financial Stability Board in Basel, Switzerland, could be gaining too much influence in the U.S. over financial regulation. Nelson has also been critical of moves to introduce global capital requirements for insurers, and of McRaith and recommendations for expanding the role of the federal government in U.S. insurance regulation.
On the coordination with international insurance regulatory discussions, Nelson agreed with McRaith on how the U.S. should approach international discussions. But he was wary about the agenda of those pushing for uniform international regulations.
“The U.S. can’t walk into the [International Insurance Society] and say, ‘You all have to accept our system,” Nelson told the audience. “But it is also true that IIS or the rest of the world will not tell us, ‘You have to have our system.'”
Nelson said he’s concerned that the IIS “is decreasing transparency while NAIC is increasing transparency.” In July, NAIC engaged a consultant to audit its governance and policy-making practices.
Nelson said there is no need for the U.S. to be completely in sync with European and international insurance regulatory trends.
“It is not crucial that all regulatory systems around the world be identical,” Nelson said. “But we do expect common results” and it will be up to federal and state insurance regulators in the U.S. to communicate that message.
Thomas Sullivan, former Connecticut insurance commissioner who is now senior advisor for insurance for the board of governors for the Federal Reserve, said that the U.S. won’t import international standards unilaterally or in their entirety.
“Just because a standard is set elsewhere around the globe does not mean it is brought in lock, stock and barrel into the U.S.,” Sullivan said.
He insisted that the Fed will go through the normal rule-making process – which includes publishing proposed rules and holding hearings and that it will make its own decisions before establishing any new financial/insurance-related policy.
“While we want to be at the table, we also have a method of dealing in the U.S. when we want to adopt” any new regulatory changes, Sullivan said.
To coordinate this, as well as the development of complementary federal and state regulation, takes plenty of communication, the panelists agreed.
“There is a spirit of cooperation amongst all of us to effectively promote in advance, a U.S. position,” Sullivan said. “We’re better served to lead with all the things we agree on. We will represent the right way to do things, serve consumers and protect our markets.”
Panelist John Huff, director of the Missouri Department of Insurance, said “our system will hopefully hold us accountable and NAMIC members will hold us accountable to have that collaboration.”
Huff said that different U.S. and state insurance regulatory bodies and groups talking to each other must “make sure we are not adding layers or redundancies in our processes.”
“The cost of having all of this collaboration,” Huff said, “can really get out of control quickly.”