international association of insurance supervisors observer panel re- / deregulation steve...
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International Association International Association of Insurance Supervisorsof Insurance Supervisors
Observer Panel
Re- / Deregulation
Steve Butterworth Chile 2002
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IAIS Observer PanelRe- / Deregulation
Chile 2002
• IAIS - Outlook on model schedules
and best practise statement.
- Mutual recognition of domestic
supervisory rules based on IAIS
Standards, Principles & Guidelines.
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IAIS Observer PanelRe- / Deregulation
Chile 2002
• In Particular - Why check compliance many times in different
jurisdictions.
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IAIS Observer PanelRe- / Deregulation
Chile 2002
Reasons for Differing Regulations
• Different markets
• Different economic goals
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IAIS Observer PanelRe- / Deregulation
Chile 2002
History
• Patchwork supervision
• Legal barriers
• Practical problems in assessing supervisory practices
• No exchange of information
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IAIS Observer PanelRe- / Deregulation - Chile 2002
WTO Model Schedules
Market Access• Reinsurance - M.A.T. - Intermediaries
- No restrictions
• Life & Non-Life Reinsurance
- No mandatory cessions
- No right of first privileges
- No discrimination re collateralization & localization
- Freedom of form & contract
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IAIS Observer PanelRe- / Deregulation - Chile 2002
WTO Model Schedules
Commercial Presence
• Form of establishments
• Equity shares
• Compulsory lines
• Monopolies
• Private participation in pensions & funds management
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IAIS Observer PanelRe- / Deregulation
Chile 2002
WTO Model Schedules
• Temporary entry of natural persons
• National treatment
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IAIS Observer PanelRe- / Deregulation
Chile 2002
WTO Best Practices in Insurance
• Transparency
• Solvency and prudential focus
• Insurance monopolies
• Independent regulatory authority
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IAIS Observer PanelRe- / Deregulation - Chile 2002
Statement by Financial Leaders Working Group• FLWG - Financial Institutions and Associations in
Europe, North America, Japan & Hong Kong
• Fully Supportive
- Greater price competition
- Product diversity and innovation
- Investment options
- Retirements security
- Local infrastructure development
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IAIS Observer PanelRe- / Deregulation
Chile 2002
IAIS Core Principles of Supervision
• Capable of observance in all jurisdictions where there are adequate resources.
• IAIS core principles contain no barriers to prevent foreign insurers operating on the same terms as domestic insurers.
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IAIS Observer PanelRe- / Deregulation
Chile 2002
Reliance on Rating Agencies
• Rating agencies not regulated
• Sometimes inconsistent
• Commercially driven
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IAIS Observer PanelRe- / Deregulation
Chile 2002
Disadvantages
• Instability of markets.
• Insurers / reinsurers pulling out.
• Overseas supervisors little interest in your domestic market.
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IAIS Observer PanelRe- / Deregulation
Chile 2002
Disadvantages
• Insurer fraud in developing countries is prevalent.
• Fraudsters migrate to those countries with little effective regulation.
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IAIS Observer PanelRe- / Deregulation
Chile 2002
The Guernsey Situation
• All insurers with a physical presence (either directly or indirectly - through agents) need a licence.
• Insurance intermediaries can place only with ‘recognized’ insurers - no licence issued.
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IAIS Observer PanelRe- / Deregulation
Chile 2002
The Guernsey Situation
• Experienced problems with fraudulent marine insurers which the ‘recognized’ insurer system eliminated.
• Model schedule proposed cross border supply without restrictions to market access for M.A.T. and insured intermediation.
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IAIS Observer PanelRe- / Deregulation
Chile 2002
The Guernsey Situation• Foreign insurers are not barred from a physical
presence.
• With current state of market, overseas branches are closing down.
• Creates problems - especially long-term contracts.
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IAIS Observer PanelRe- / Deregulation
Chile 2002
Conclusion
• There must be total mutual international recognition of prudential and market conduct supervisory standards.
• Impossible? - Will politics and economic considerations interfere?