NAIC's Vaughan Presents Paper At Insurance Reform Summit

 

Friday, Mar 06,2009, 10:19:11 AM   Click:

Addresses solvency regulations, capital requirements, lessons learned

WASHINGTON, DC (March 5, 2009) - The National Association of Insurance Commissioners (NAIC) CEO Dr. Therese (Terri) Vaughan, Ph.D., today issued a document, the author, "The consequences of Solvency II for the U.S. Insurance Regulation." document of Dr. Vaughan, who was presented here at the Networks Financial Institute (NFI) 6th Annual Summit Insurance Reform, includes:

A brief description of the Solvency II project, currently the capital of the proposed regulatory system for insurance companies in the European Union;
An overview of the main differences between the United States between regulation and solvency Solvency II;
A summary of lessons learned during the current financial crisis, and
Areas for future regulations on the solvency of the United States.
"Much work has been done in recent years about the regulatory and capital requirements and the process of regulatory reform will continue," says Dr Vaughan. "It is the responsibility of insurance supervisors to take back, back to the underlying assumptions, and assess the impact, if any, their conclusions future work. "

In particular, Dr. Vaughan focuses on three assumptions:

1. Company incentive for risk management: "The effectiveness of market discipline itself is in question, as the regulator and take note of the mass counterparts of hidden leverage and the risks that exist in our financial system. "
2. Regulator ability to identify high-risk activities in enterprises: "Effective regulation of surveillance systems must go beyond a reliance on capital. It is important for regulators to be aware of red flags that require their attention. "
3. The effectiveness of regulation: "A review of the robustness of the regulatory mechanisms of assurance that the United States have developed to coordinate and create checks and balances could provide valuable clues for makers to develop surveillance systems that cross geographical boundaries. "

In addition, Dr. Vaughan said that some of the lessons learned have confirmed the wisdom of certain aspects of U.S. regulations, including:

• Checks and balances;
• A combination of principles and rules based on rules-based;
• The importance of other regulatory tools, and
• Improvements to the regulation of insurance in the United States.

Dr. Vaughan concludes: "The best regulatory structure is one that encourages supervisors to take action where appropriate, and a system of duplication that includes regulatory oversight before May of this objective."
Click HERE for the full text of Dr. Vaughan's paper .*

* The opinions expressed herein are the personal opinions of the author and do not necessarily reflect the views of the NAIC or its members. Dr Vaughan has served as Iowa Insurance Commissioner from 1994 to 2004. In this position, she served in the administrations of both major parties and was the former Commissioner of the history of Iowa. She was an active member of the NAIC, serving as president in 2002. Before being appointed CEO of the NAIC in February 2009, Dr. Vaughan was the Robb B. Kelley professor emeritus of insurance and actuarial science at Drake University.

About the NAIC

Established in 1871, the National Association of Insurance Commissioners (NAIC) is a voluntary organization of chief insurance regulatory officials of the 50 states, the District of Columbia United States and five territories. The NAIC has three offices: Executive Office, Washington, DC, Headquarters, Kansas City, Mo., and securities valuation office of the New York City. NAIC serves the needs of consumers and industry with an objective to support the state regulation of insurance because they protect consumers and maintain the financial stability of the insurance market. For more information, visit www.naic.org