IAIS 2008 Annual Conference: Hungary

The International Association of Insurance Supervisors’ 2008 Annual Conference, Budapest, 12-17 October 2008. Theme: “Insurance and the Globalisation of Financial Services: Challenges for Worldwide Regulation and Supervision.”

For the first time, Lloyd’s acted as sponsor of the conference, which was held during an extraordinary week of market turmoil and amongst public calls for global regulatory change and government intervention.

The conference was marked by many discussions (in both closed and open meetings) of events surrounding the recent financial turmoil, the near-collapse of AIG, the need for greater international co-operation between regulators, the challenges of supervising multi-national financial conglomerates operating across multiple jurisdictions, changes needed to enhance prudential solvency requirements, and the robustness of internal models.

In his keynote address, Alexandre Lamfalussy called for central banks to develop better systems for detecting the emergence of potentially systemic dangers and, more controversially, proposed that the European Central Bank should be given operational co-responsibility for the supervision of large cross-border banks in the euro area.

Views on the subject of international co-operation and mutual recognition between regulators were not cohesive. On the one side, there were calls for increased cooperation and an indication that certain territories were already taking steps with a view to enabling recognition and collaboration with other regulators. Europe’s position as the leader of Solvency II reforms is providing a catalyst for steps towards mutual recognition and “equivalence”, with other territories examining similar approaches and seeking dialogue with European supervisors.

Other regulators took a more protectionist stance in defence of local asset requirements and expressed caution about proposals to implement global group supervision and collaboration between regulatory regimes. However, the need to develop closer co-operation between regulators internationally was reinforced in many of the panel sessions and meetings.

In the formal part of the meeting, the IAIS approved the progress of supervisory papers:

  • Standards and guidance on enterprise risk management for capital
  • adequacy and solvency purposes. 
  • Standards and guidance on the use of internal models for regulatory
  • capital requirements. 
  • Principles on group-wide supervision, and 
  • Guidance on mutual recognition for reinsurance supervision.

Solvency II took centre stage in the debates over solvency standards and continues to dominate ongoing discussions on the subject. Discussions on Solvency II included a debate on whether its solvency requirements would provide European insurance companies with an unfair competitive advantage due to perceived lower solvency requirements. However, this view was not supported by the European Commission’s evidence, and general regulatory opinion was in favour of Solvency II as encouraging better risk management within insurers and enhanced prudential supervision by regulators.

The conference also provided Lloyd’s with an opportunity to discuss key points of interest with regulators from various jurisdictions on issues affecting the market and to reiterate the message that Lloyd’s position remains robust, despite the recent financial turmoil. 

Lloyd’s View on the International Regulatory Environment

  • Lloyd’s supports the IAIS and international regulators in their work to encourage international regulatory co-operation and to develop global standards for insurance regulators. 
  • The European Union is a good model to build upon in developing regulatory cooperation, based on common standards and supervisory collaboration. 
  • International regulators should be supported and encouraged to develop approaches that enable them to rely on the supervision carried out by the ‘Home Supervisor’ in an insurer’s place of domicile, avoiding onerous, duplicative processes that do not enhance consumer protection. 
  • Countries benefit from enabling strong, well regulated (re)insurers like Lloyd’s to establish in their markets, but also by ensuring such (re)insurers are able to operate on a cross-border basis.
Last updated on 17 Dec 2008