Group Chief Risk Officers interviewed support global regulatory efforts but worry how global standards will coexist alongside local requirements. Sharp differences still exist between US and European regulators regarding future regulatory proposals
With Evolving Insurance Regulation – The Journey Begins, the fifth in an annual series of reports, KPMG International examines developments that are leading the transition to a new era in insurance regulation and fundamentally changing the way the insurance industry operates globally. The report provides an in-depth review, with insights from a panel of industry leaders and regulators, of the impact of recent actions by the International Association of Insurance Supervisors (IAIS) and other global bodies and regional regulators.
“While industry practitioners and regulators see value in greater international consistency and harmonization of insurance requirements, with ongoing cooperation and engagement by supervisors, and a desire for greater IAIS focus on supervisory activities going forward, concerns were raised as to whether this could actually be achieved in practice,” says Gary Reader, Global Head of Insurance, KPMG International.
”Our panel of practitioners recognized that the implementation of the Insurance Capital Standard (ICS) still requires much more understanding and debate among supervisors and industry, particularly regarding how global standards may coexist alongside local requirements and whether new standards will require changes to local solvency requirements. There is a strong desire for more dialogue in developing the framework.”
The report discusses the international developments that are dominating regulatory changes, with a review of proposals and what they mean for market participants. Most notable are the steps taken by the IAIS with the establishment of the Insurance Core Principles (ComFrame) and developments with the ICS – with the publication of a consultation document and ICS guiding principles.
“Significant questions remain regarding how the ICS will apply and interact with country and regional approaches, particularly in the US and Europe,” said Rob Curtis, Global Insurance Regulatory Lead, KPMG International. “Addressing regional differences in insurance products and exposures, as well as distinctions between insurance and other financial sectors were also identified by our panelists as necessary preconditions for an effective global framework. It remains unclear from the current ICS consultation paper how such issues will be addressed, but the decision to allow more time for the debate may help resolve some of the concerns raised.”
As it stands, sharp differences still exist between US and European regulators regarding the form and ultimate implementation of new global reforms with questions as to whether a single prescriptive solvency regime for all insurers could ever be supported.
“The IAIS has commenced the process of developing a framework before reaching an agreed implementation commitment from regulators, which includes not yet having consensus concerning the appropriate level of policyholder protection. This raises the very real prospect of duplicate or contradictory regulations emerging, which would be contrary to the overriding aim and expected benefits of achieving greater consistency and harmonization of requirements by having an ICS,” according to Curtis.
In addition to its detailed international regulatory picture, the report also includes more than 70 pages of in-depth reviews of regulatory developments around the world, including countries and sub-regions in the Americas, Asia-Pacific, and Europe, Middle East and Africa, making the report a particularly valuable resource.
“We are truly in the early stages of a new journey in global insurance regulation, and as a result of new global requirements, insurance groups are going to be subject to new, more rigorous governance, reporting and capital requirements,” said Gary Reader. “Insurers need to be proactive and engaged in the fast-moving and important developments that are taking place at an accelerated pace. We hope our Evolving Insurance Regulation report can make a valuable contribution in helping insurers better understand and meet new challenges, and stay ahead of the game.”
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