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Solvency Regulation in the U.S. and Abroad Part II – The U.S. Response CAS Seminar on Reinsurance June 6, 2011 Joseph B. Sieverling Reinsurance Association of America
Presentation Overview • U.S. Equivalence • Overview of the NAIC SMI Project • ORSA – ERM as a Regulatory Tool • Risk-Based Capital Improvement • Additional background on CAS presentation website • NAIC SMI Roadmap updated 5/20/11 • AAA Report on P&C RBC – Safety Level and Missing Risks – 1/31/11 3
U.S. Equivalence • Third Country Equivalence is one major Catalyst for Change in the U.S. System • Reinsurance Collateral Issue – a leading indicator • State Insurance Regulators/NAIC – Protect their relevance • The Dodd Frank Act is the other main driver • FSOC – Systemic Risk and Groups • Federal Insurance Office • Non-Admitted and Reinsurance Act Provisions in DFA • The NAIC and States believe they must improve to remain a player in the regulation of an increasingly global industry 4
Equivalence –What and How? • Two main elements of Equivalence • Solvency II • Int ’ l Association of Insurance Supervisors (IAIS) Insurance Core Principles (ICP ’ s) • How will the U.S. be evaluated? • IMF/World Bank Financial Sector Assessment Program (FSAP) • EIOPA standards / EU Commission Third Country Equivalence decisions 5
Equivalence –FSAP Review • U.S. State System Completed FSAP evaluation in 2010 • Based on old ICP ’ s - Revised ICP ’ s currently under development • NAIC Scored well on all areas except • Supervisory authority, group supervision, anti-money laundering • Next FSAP review will include revised ICP ’ s including: • Supervisory Cooperation and Info Exchange ICP 3 • Corporate governance ICP 7 • Valuation (assets & liabilities) ICP 14 • ERM and Capital Adequacy/Internal Models ICP ’ s 16 & 17 • Group-wide Supervision ICP 23 6
Outcomes Based Review? The U.S. System has evolved and is effective 7
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