ICYMI: Politico: International insurance regulatory group under scrutiny
Politico: International insurance regulatory group under scrutiny
By Zachary Warmbrodt
An increasingly important group of global insurance regulators on Saturday will vote to overhaul the way outsiders can access its meetings, and the move is riling policymakers and insurers in the United States who are complaining about a lack of transparency concerning how proposals for policing the industry are being created.
Little-known outside the insurance industry, the International Association of Insurance Supervisors in the last few years has been given the responsibility of helping identify “systemically important” insurance companies for increased regulation in the aftermath of the bailout of American International Group as well as for developing new regulatory standards for an even wider range of insurers.
Next year, the group plans to shutter a program where individuals and organizations can pay more than $20,000 to become “observers” at its meetings. These fees are used to help offset the group’s budget. IAIS officials argue that limiting observers under the current rules will make its work more efficient.
While the pay for access model has critics, the proposed trade-off isn’t satisfying insurers and U.S. lawmakers who argue that the group will be offering stakeholders less access to meetings as it rewrites fundamental safeguards for the insurance industry. That’s because, under the proposed rules, outsiders will have to be invited to provide “targeted, technical input” at meetings rather than generally being able to participate.
“The proposal … will render null and void my purpose for joining as an ‘observer’ and will greatly limit the ability of the IAIS to directly consult with and inform me and other systemic risk policymakers,” Financial Stability Oversight Council member Roy Woodall, the panel’s designated insurance expert, said in a comment letter to IAIS.
Rep. Randy Neugebauer, the Texas Republican who heads a House insurance subcommittee, is considering a hearing on IAIS this fall.
“Consumers and insurers deserve a voice at the table,” Neugebauer said Thursday. “To shut them out would be counterproductive to the health of the global financial system.”
IAIS, whose members are meeting in Amsterdam this week, is celebrating its 20th anniversary this year. The stated mission of the group, which is comprised of regulators from around 140 countries, is to “promote effective and globally consistent supervision of the insurance industry.” IAIS formed in 1994 as a nonprofit in Springfield, Ill., and it later relocated to Basel, Switzerland, where a similar group focused on banking issues is located.
The group has grown in importance in the aftermath of the 2008 financial crisis due to efforts in many countries to put in place more oversight of large insurance companies and to coordinate these plans across different international jurisdictions.
U.S. representation at IAIS includes the National Association of Insurance Commissioners, which represents state insurance regulators, and the Treasury Department’s Federal Insurance Office, which was created by the 2010 Dodd-Frank law. Most recently, the Federal Reserve joined the group after Dodd-Frank granted the U.S. central bank powers to oversee certain insurance companies.
IAIS has worked closely with another global group of regulators linked to the G20, the Financial Stability Board, to overhaul regulation of the insurance industry.
IAIS officials Thursday said they expected to receive the G20’s blessing next month on the first of a three-phase set of insurance capital standards. In addition, IAIS helped collect data on FSB’s upcoming reassessment of whether certain insurers and reinsurers should be labeled “systemically important.”
IAIS has made it on to lawmakers’ radar amid industry and state regulator concerns that the push at the international level will undermine the U.S. regulatory system or dictate what rules will be put in place.
Adding fuel to the fire Saturday, IAIS members meeting in Amsterdam will vote to discontinue the observer program next year. Next month, IAIS plans to take a second round of public comment on its new system for working with outside stakeholders.
Ahead of the vote, Rep. Michael Capuano (D-Mass.) on Wednesday sent a letter to the heads of the Federal Reserve, Treasury’s insurance office and the NAIC saying it was important that U.S. policy holders and companies have “an ability to contribute substantively via a transparent process.”
“Ending IAIS’ current funding model which requires interested parties to pay a significant annual fee in exchange for access to IAIS meetings, is a positive step forward,” Capuano said. “As you are no doubt aware, however, there is some considerable unease amongst U.S. insurance companies at the impact that other proposed changes could have on the transparency of the IAIS process and on the ability of stakeholders to provide meaningful and timely input.”
Woodall, who was involved with the inception of IAIS, is one of dozens of observers that will be impacted. Woodall is a voting member of FSOC, which is a U.S. panel of top financial regulators that has the power to designate domestic insurance companies as “systemically important.”
Woodall fills a seat on FSOC reserved for an insurance expert. FSOC isn’t a member of IAIS, but Woodall signed up as an IAIS observer at the beginning of this year. He has suggested that IAIS amend its bylaws to allow more cooperation with members of FSOC and other similar national bodies.
In his letter to IAIS, Woodall said the changes will “greatly limit” the ability of IAIS to consult with other officials working to contain systemic risks.
“Relegating systemic risk policymakers to only those opportunities afforded to the general public would reduce the likelihood of effective attainment of the IAIS goal of providing a meaningful contribution towards global financial stability,” he said. “Moreover, meetings in which financial stability policymakers are not afforded more robust access than that provided to the general public may negatively influence decisions to attend important IAIS meetings; and, as a result, opportunities to build vitally important relationships and consultations may be lost.”
FSOC, which mostly meets and votes in closed meetings, is also a target for lawmakers complaining about transparency.
“It shouldn’t come as a surprise that the Fed and Treasury are exporting the non-transparent FSOC model to IAIS,” Neugebauer said...