The pace of regulatory evolution in the insurance sector varies greatly across the globe. In this chapter of the Evolving Insurance Risk and Regulation report, we examine the regulatory environment and impacts within over 40 countries.
As the world becomes smaller, thanks to technology, and where large firms operate across many jurisdictions, it is ever more important to understand the dynamics in each market – what risks are dominant in a particular region, and how national and international regulations are shaping the industry.
The analysis covers over 40 counties and considers how local insurance regulatory regimes are developing to comply with the international core principles (ICPs), as well as providing an overview of important prudential and conduct initiatives. The evolution of risk-based capital (RBC) regimes is a consistent theme.
Within Europe, insurance regulation has seen the biggest evolution in decades, with Solvency II finally coming into force on 1 January 2016.
Despite the UK voting to leave the EU in June 2016, the process will not commence before formal notification under Article 50 of the Lisbon Treaty is given. This appears unlikely to happen this year. Once triggered, there is an (extendable) two year negotiation process before formal exit will become effective. Until such time, the UK remains bound by all European legislation and able to benefit from the access to the single market that EU membership brings.
In the Middle East, modernization of the insurance sector continues to be a priority, with movement towards a more risk-based approach to supervision. The regulatory regimes in African countries are also evolving on both the prudential and conduct side, including a number of microinsurance initiatives.
Throughout the Americas, insurance companies are addressing a dynamic, shifting domestic regulatory environment while adapting to international developments at the global and European levels. The focus remains on the consumer and meeting their insurance needs while protecting personal data.
In the United States, insurer capital requirements are changing significantly as multiple and coordinated frameworks from the states and federal government move simultaneously. In Bermuda, the recognition of full equivalence under Solvency II provides opportunities for new levels of regulatory cooperation and certainty for their insurance marketplace. Competitive pressures in Canada are creating more concentrated insurance marketplaces for both life and property casualty markets. South America continues to face unique political risk challenges, but the insurance sector remains focused on product development in response to customer needs. Market penetration continues to increase utilization of health plans and coverage for personal risks.
Within the Asia Pacific region, the move toward RBC and economic valuation based frameworks is picking up pace. In China, the industry is focusing on implementation of the new three pillar solvency regime, with Hong Kong moving ahead with plans to replace its current rules-based solvency capital regime with a three pillar RBC regime. Korea also has plans to implement a Solvency II-based regime as part of its own regulatory framework. Enhanced risk management frameworks and policies, and improving supervision of insurance groups, are also areas of regulatory focus. For example, all Japan insurers are now required to submit an ORSA report, while Hong Kong has proposed a resolution regime for systemically important insurers.
All regulatory developments across the globe bring challenges to insurers, requiring insurers to develop the necessary internal capabilities and risk management frameworks to comply with this new era of insurance regulation.