Solvency II Jobs, Challenges for
Supervisors, Solvency II and the Dodd Frank Act
Welcome to the September 2010 edition of the Solvency ii
Association newsletter
Dear Members,
Before the summer of 2010, there were some
critical differences between the United States of America and
the European Union in the supervision of insurers and
reinsurers. These differences had clearly indicated that the USA
had no chance to become Solvency II Equivalent. For example:
- The day to day supervision of the
insurance industry remained at individual state level.
- The National Association of
Insurance Commissioners (NAIC) did not qualify as a "competent
authority" under Solvency II.
-
Group supervision in the US
was not equivalent with the group supervision under the Solvency
II directive.
- The ability of the state insurance
supervisors in the USA to exchange information was not
equivalent to the exchange of information under the Solvency II
directive.
The new US Dodd-Frank Act creates the Federal
Insurance Office (“FIO”), a federal insurance regulator (for the
first time), that changes everything in the
insurance
and reinsurance industry in the United States.
"We welcome the passage of the Dodd-Frank Act
and look forward to working with the proposed
Federal Office of Insurance as it
develops its policy on international insurance issues."
"We
hope it will play an active role in
harmonising regulatory standards and dealing with the
equivalence issues which arise under Solvency II."
Sean McGovern, Lloyd's Director and General
Counsel
This summer was a
very busy period, and the QIS5 was not the only reason.
The months that follow will also be difficult, starting from the supervisors.
If you may google "solvency ii jobs", you
will be very surprised.
According to CEIOPS
(Report on the Preparedness of Insurance Supervisors to
implement Solvency II, June 2010), one of the
main challenges
for supervisors relates to the development of appropriate staff
(number , type, competences), with an expected increased number of
staff of 20% by the date of entry into force of Solvency II
(December 2012).
Most countries however have indicated
difficulties in recruiting staff with Solvency II knowledge,
due
to competition in the market, as the industry can offer better
remuneration packages to recruit skilled staff.
According
to CEIOPS, work on the implementation of Solvency II is
an
unprecedented complex and challenging process in the area of
insurance supervision:
It is a long process that, started well
in advance of the adoption of the Solvency II Proposal in July
2007, is proceeding at an increasing pace, involving a change in
mentality, competences, covering all the different areas/sectors
of the supervisory authorities, demanding resources and often
implying reorganisation.
This applies even for countries
whose current regime already envisages forms of risk and
principle based supervision.
Work on the implementation
of Solvency II is already underway in all the supervisory
authorities, although the level of advancement differs amongst
supervisory authorities.
Participation in CEIOPS Working
Groups, training, QIS exercises and preapplication for internal
models played a major role in spreading the SII culture within
the organisation of the supervisory authorities.
QIS
exercises have been fundamental in helping both insurers and
supervisors gradually to prepare for the introduction of the new
prudential regime.
QIS5 represents a very important
milestone of the Solvency II implementation, allowing a complete
simulation of the new regime (including calibration), and
providing a starting point for an ongoing dialogue between
supervisors and undertakings about the Solvency II
implementation.
Close cooperation and dialogue between
supervisors and industry/stakeholders are indeed a key feature
of the preparation process for Solvency II, and have
enhanced
common interpretation and parallel level of advancement.
Interaction with individual undertakings on their level of
preparedness to Solvency II has already started in all
jurisdictions, although with a different stage of advancement.
Fundamental changes are needed in the supervisory
methodology, tools and procedures, in all the different areas of
insurance supervision – quantitative requirements (Pillar I),
qualitative requirements (Pillar II), supervisory
reporting
and public disclosure, group supervision - in nearly all
supervisory authorities.
Following the introduction of
the new risk based Pillar I requirements – including technical
provisions, own funds, Solvency Capital Requirements,
investments - staff involved will need to acquire new
competences, particularly
in the area of actuarial and
financial mathematics.
The area of internal models
represents possibly the most challenging one for supervisors.
The majority of supervisory authorities have
pre-application
processes for internal models already in place.
These
processes often share some degree of commonality and can form a
valuable ‘learning tool’ for those who have yet to implement
such a process.
Important steps have been taken by
supervisory authorities, often in conjunction with the
undertakings concerned, to address Pillar II requirements,
aiming at the risk assessment of undertakings’ individual
profile.
In the area of Group Supervision, development of
arrangements for, and enhancement of participation in, Colleges
of Supervisors is expected, with subsequent resource
implications.
On the organisational side of the
supervisory authorities Solvency II will impact several
different departments of supervisory authorities: from
supervisory functions, which need to complete the switch from
Solvency I to Solvency II, to other functions such as
statistics, reporting, monitoring, legal units, also involved at
many supervisory authorities.
Supervisors are aware of
the structural needs of Solvency II and have already made
changes to the structure of the authority for complying with the
requirements of Solvency II.
However, further
organisational changes are expected - including changes related
to staff, structural reforms, technological developments - as
are the associated resource implications (financial and
non-financial).
One of the main challenges for
supervisors relates to the development of appropriate staff
(number, type, competences), with an expected increased number of
staff of 20% by the date of entry into force of Solvency II
(December 2012).
Most countries however have indicated
difficulties in recruiting staff with Solvency II knowledge, due
to competition in the market, as the industry can offer better
remuneration packages to recruit skilled staff.
Solvency
II training based on a case study approach and staff exchange
programmes focused on common areas of interest (assessment of
internal models, risk management, stress test and group
supervision) are some of the most useful tools for achieving
convergence of supervisory practices and a common supervisory
culture, in which supervisors foresee further development.
The preparation of the Solvency II implementation has still
a long way to go, and will still require considerable efforts
and resources (financial and non-financial) for the main part of
the supervisory community.
CEIOPS Report on the
Preparedness of Insurance Supervisors to implement Solvency II
June 2010
During the Members’ Meeting of 25-26 March 2009
CEIOPS’ Convergence Committee received a mandate to carry out a
mapping exercise of the preparedness of supervisors for Solvency
II.
This exercise is part of the initiatives included in
the Solvency II - Road to implementation.
Following the
mandate received, the Convergence Committee has
developed a
questionnaire, based also on the input received from the Chairs
of the Solvency II Expert Groups.
The questionnaire
covers both changes already made and expected changes to
supervisory methodology, organisation or staff, in anticipation
of the coming into force of Solvency II.
The questions
touch both organisational and technical profiles, in particular:
general state of preparedness of the supervisor; supervisory
methodology, tools and procedures (including Pillar I, Pillar
II, Pillar III and group requirements); institutional
organisation of the supervisory authority; human resources and
IT.
The questionnaire, approved at the March 2010
Members’ Meeting, has been sent to all 30 CEIOPS Member and
Observer Authorities supervising insurance undertakings. Replies
were received from all competent supervisory authorities during
April 2010
[Austria, Belgium, Bulgaria, Cyprus, Czech Republic,
Denmark, Estonia, Finland, France, Germany, Greece, Hungary,
Iceland, Ireland, Italy, Latvia, Liechtenstein, Lithuania,
Luxembourg, Malta, Netherlands, Norway, Poland, Portugal,
Romania, Slovakia, Slovenia, Spain, Sweden, United Kingdom]
General information about the supervisory authority
From the 28 supervisory authorities that answered the
questionnaire, 11 small supervisory authorities (with less than
40 employees dealing with insurance), 11 are medium-sized
supervisory authorities (with 40-100 employees dealing with
insurance), and 5 are larger supervisors (with more than 100
employees dealing with insurance).
The
number of staff
varies widely from 25 to over 3.300, depending on the market
size as well as the level of integration of the supervisory
authority.
As to the number of supervised insurance and
reinsurance undertakings subject to Solvency II the range is
also wide: from 10 up to 625.
As a whole
over 3500
insurance and reinsurance undertakings supervised by the 28
responding supervisory authorities are subject to Solvency II.
General state of preparedness
Individual supervisors
gap analysis and work plans
The vast majority of the
respondents (19) have already established a work program for the
implementation of Solvency II, although in a more or less
granular and advanced manner, or this is underway (8).
The main work streams identified are the following:
• Gap
analysis, to compare the current regime to Solvency II
•
Legislative work, for the implementation of the Solvency II
directive (and Level 2 measures) into national law
•
Supervisory processes adjustments
• Internal models, in
particular pre-application
• QIS5
• Training and
recruitment
• Engagement with undertakings
•
Technology
In many cases, the establishment of a specific
Solvency II work program is coupled with the establishment of
dedicated Solvency II implementation teams within the
organisation of the supervisory authority, or joint working
groups, envisaging the participation of supervisors, ministries,
industry associations and actuaries.
Similarly, the vast
majority of the respondents (20) have a gap analysis underway,
with only a few (5) not having started yet, and a very few (3)
that have already completed it.
The main areas of focus
of the gap analysis were: necessary amendments to legal
provisions, adaptation of supervisory tools and processes,
change of approach, restructuring of supervisory teams and
resource implications.
In a few cases, the work program or
gap analysis only focuses on the legal aspects of the
implementation.
The major recommendations given to other
supervisory authorities who want to conduct a gap analysis are:
to involve all areas concerned (at least supervision, legal, IT,
policy); to engage with supervisory staff from an early
stage; to do a correlation table between current law and the
Solvency II Directive; to prioritise.
Spreading the
Solvency II culture within the organisation
The number of
people involved within each authority in the Solvency II project
has almost everywhere steadily increased since the adoption of
the Solvency II Directive Proposal in July 2007, through both
internal and external
expansion (i.e. wider involvement of
existing staff in the Solvency II project, as well as
recruitment of new staff for the specific purpose of working on
Solvency II), and is planned to further increase further before
the entry into
force of the new regime on 1 January 2013.
In all cases, a mix of different profiles is involved in the
Solvency II work: policy advisors, line supervisors, risk
management specialists, actuaries, and legal.
Overall
the resource profile has changed since 2007, when the resource
mix was primarily policy and legal, whereas there is a much
larger number of supervisors and risk specialists involved now,
with a dramatically increased need of actuaries and
mathematicians.
Often all levels of the supervisory
organisation are involved in the Solvency II project, ranging
from the highest levels of management right down to the
supervisory teams.
In a couple of cases, there are also
secondees from industry.
The main channels for the
participation of staff in the Solvency II projects have been
participation in CEIOPS working groups, participation in QIS
exercises, collaboration with ministries and discussion at EU
level, in-house
and external training. In addition, twinning
and visits to other supervisors take place.
Between now
and the entry into force of the new regime, individual
authorities intend to achieve a further involvement of their
staff in the Solvency II project, mainly through enhanced
regular dissemination of expert knowledge in the form of
internal seminars, especially for the front-line supervisors;
increased joint cooperation of all divisions and participation
in the pre-application process for internal models.
QIS5
All supervisory authorities expect a higher degree of
participation for QIS5 compared to QIS4.
Some
authorities expect all undertakings to participate in the QIS5
exercise or almost all, while others stated that they wish or
will ask undertakings all to take part.
The only country
that did not take part to previous QIS exercises will
participate in QIS5, through the support of an external
consultant.
Supervisory authorities will encourage the
participation of undertakings to QIS5 by different means:
• making the exercise (de facto) mandatory
• meeting
individually with all undertakings
• asking undertakings
to explain reasons for not participating in QIS5 and contacting
those that did not take part in QIS4
• issuing letters
and press releases
• organising kick-off meetings and
workshops with the insurance industry, sometimes tailored to
different parts of the industry
• translating
introductory material
• providing national guidance
• setting up Helpdesks and Questions & Answers fora
•
providing feedback to all participants on the general findings
of QIS5
• discussing with individual undertakings their
results for QIS5.
Compared to QIS4, supervisory
authorities envisage further messages for the QIS5 exercise:
• all undertakings are expected to participate in QIS5
• QIS5 is the last chance to participate in a QIS before
implementation of the new regime
• undertakings should
participate in QIS5 if they want to get the calibration right
• importance of testing different options on the table for
the finalisation of the Level 2 measures within the EU legal
process
• QIS5 is a necessary milestone for the Solvency
II implementation (complete simulation of the new regime)
• QIS5 is mandatory for undertakings who want to start the
pre-application for internal models
• more individual
clarifications and feedback will be provided by supervisors
• authorities will have an increased focus on the quality of
the results.
QIS5 will be widely used by national
supervisors to facilitate their own preparation for the
implementation of Solvency II, because it will provide a
focussed opportunity for practical experience of Solvency II,
will yield a rich
and robust data set, will complement the
more general training programme for those who have so far been
less involved in the development of the new regime (e.g. QIS5
technical specifications will be used for internal training on
the Standard Formula), so that supervisors will be trained and
included in the process of reviewing QIS5.
At the same
time, QIS5 will be widely used by undertakings as it will be a
fundamental part of undertakings’ preparations for the Solvency
II implementation, giving them an understanding of their
preparedness in terms
of regulatory capital position,
processes and systems, risk management thinking and any actions
they may need to take in order to be ready for Solvency II.
The results of QIS5 will constitute the basis of discussion
between supervisors and undertakings.
Interaction
with individual undertakings
The vast majority of
respondents (26) have already started discussions with
individual undertakings in respect of their preparedness for the
new prudential regime. The stage of advancement of this dialogue
varies between authorities, and often is more advanced in
respect of larger insurance undertakings.
In the last
years Solvency II has been one of the main agenda items in
general meetings with undertakings, review meetings, regular
meetings/visits with undertakings conducted on a periodical
basis and on-site inspections.
In several cases, specific
Solvency II meetings are organised, or this is planned for the
near future.
Different kinds of meetings are held, at
different levels.
From the undertaking’s side, meeting
attendees would typically include: the person nominated as
responsible for delivering the Solvency II programme within the
undertaking, senior representatives from risk, actuarial,
finance
and compliance functions (typically Chief Risk
Officers), project management personnel, and occasionally
outside consultants.
Authority representation can
include: the responsible supervisor, Solvency II policy
technical experts, Solvency II internal model expert.
In
many cases, undertakings have been requested to appoint a
Solvency II responsible person.
Sometimes this must be a
Member of the Board.
In several cases, the supervisory
authorities have sent letters to the Board concerning the
Solvency II implementation, also recommending undertakings to
carry out a gap analysis and establish a Solvency II work plan.
In some cases, specific questionnaires have been developed
to ask undertakings about their preparedness for Solvency II or
Communications, or are planned.
These questionnaires
deal mainly with Solvency II preparedness, governance, internal
model, and technical provisions.
Also, assessment of
capital need, organisation, and IT systems are areas
investigated.
The answers to these questionnaires are
used by the supervisory authorities as basis for discussing the
undertakings preparedness for Solvency II and to
illuminate/pinpoint their implementation problems and general
understanding of the new supervisory regime.
The scope of
interviews is mainly any gap analysis undertaken by
undertakings, or more generally their preparedness for Solvency
II; internal model and internal control system.
The
main
lessons learned from these initial discussions with undertakings
are the following:
• there are different levels of
preparedness among undertakings
• importance of high
level involvement and involvement at all levels, as it appears
that, for the time being, CROs almost exclusively deal with
Solvency II
• such meetings present good opportunities
for those supervisors not engaged directly in the development of
Solvency II to learn on the job and gain practical experience
• communication to the market was very well received by risk
managers of a large number of undertakings, because it has
obliged the management to become aware of the upcoming Solvency
II regime and of its consequences for the undertaking.
Communication with the market
Each of the supervisors
has adopted a number of different means to communicate with the
market about the Solvency II developments.
First, the
publication of policy papers sometimes published for
consultation, letters, Circulars or Communications to the
market, periodical newsletters, studies and articles are issued.
Secondly, different types of meetings and seminars are
organised to communicate with the market, ranging from seminars
and technical meetings organised by supervisors and open to
industry and stakeholders, to presentation of timetable and
the organisation structure regarding Solvency II of the
supervisors to company representatives, participation of
supervisors in working groups set up by industry associations,
speaking events run by supervisors or professional bodies,
discussion forum run by supervisors, kickoff events with a
general overview on Solvency II implementation, or QISs.
Supervisors also post a number of Solvency II related
information on their websites, including general Solvency II
updates, subject-specific updates, correspondence with the
industry.
Several procedures/processes have been put in
place by supervisors to deal with direct enquiries from
undertakings: sometimes enquiries are dealt with directly by
staff involved in the Solvency II groups; where possible, a
named contact for undertakings is provided, or contact persons
are communicated for different areas; email addresses are set up
that field types of queries promoted on the Solvency II pages of
their website; a Q&A database is set up.
Supervisory
methodology, tools and procedures
Pillar I requirements
The vast majority of respondents (25) expect
material
changes as to the solvency valuation in the area of the Pillar I
requirements due to the new prudential regime.
Only one
supervisor does not expect such material changes.
The
areas in which supervisors think the major changes will occur
are:
• the valuation of technical provisions
• the
calculation of capital requirements (SCR) and own funds
•
the regulation of investments
• the introduction of
internal model
Correspondingly, the vast majority of
authorities (25) anticipate the need for their staff involved in
the process of Solvency II to acquire new competences.
Most of the supervisors see a need with regard to actuarial and
financial mathematic competences to be able to assess the new
Pillar I requirements.
In addition, specific competences in
economics or legal aspects, competences in investment
strategy as well as competences regarding ERM, market risk
and operational risk are explicitly mentioned by respondents.
Only two supervisors consider that their staff already have
all the necessary competences.
The supervisors have
already and/or will possibly have to further adapt their
supervisory methodology, tools and procedures in order to be
prepared to assess the fulfilment of Pillar I requirements
under the Solvency II regime.
a) Actuarial tools are already
applied for the assessment of technical provisions in most
cases.
b) Supervisors encourage undertakings to have internal
processes and procedures in place to build up adequate
statistical databases for the calculation of their technical
provisions in accordance with Solvency II by
• analysing the
adequacy of data during on-site inspections
• asking
undertakings to take part in QIS exercises
• using gap
analysis questionnaires
• asking undertakings to give a
number of statistical templates with validation tests in
order to have an idea of the data quality
Sometimes there is
already a legal obligation under the current law requiring
the insurance undertakings to collect adequate data.
c) A
vast majority of supervisors already developed or are planning
to develop market tables or market run-off patterns of claims
data used in the valuation of technical provisions for
comparison or benchmarking purposes.
A few stated that
they see problems as to deriving market tables or market
run-off patterns of claims data for some insurance classes
because of the businesses differing substantially among market
participants, or because using benchmarks could send a wrong
message to the market, discouraging the promotion of high
data quality standards
in each undertaking.
d) On the
preparation of the assessment of own funds, supervisors
generically prepare by being involved in CEIOPS Expert Groups or
by participating in QIS5; one supervisor reported already
having a process for monitoring own funds in place which has
to be adapted to the Solvency II regime.
e) As to the
preparation for the process of supervisory approval of
undertaking-specific parameters for the calculation of the life,
nonlife and health underwriting risk modules, supervisors
have not considered this issue in detail yet, and intend to
wait for the outcome of the Level 2 and Level 3 developments
in this area, as well as QIS5
results.
f) Supervisors are
involved in the process of pre-specifying standardised
catastrophe risk scenarios to ensure that the geographical
specifications for catastrophe risks in the standard formula are
appropriate for the respective markets by participating in
working groups with the industry and actuaries which deal
with catastrophe risk
scenarios; by collecting data during
the QISs about market exposure, and making national scenarios
available; by giving the markets directions based on expert
judgements.
g) Supervisors prepare for the assessment of the
ongoing appropriateness of the calibration of the standard
formula against the experience in their respective
markets through the QIS exercises (sometimes combined with
alternative assessments).
h) With regard to the frequent
analysis of investment portfolio and the assessment of
investments made in more complex or less transparent classes
of assets some supervisors are of the opinion that an analysis
through reporting templates based on single assets is necessary.
Others already analyse the investment portfolio of insurance
undertakings using this approach.
Some supervisors reported
in a more general way that they asses the assets on a
quarterly basis.
Internal models
Pre-application
for internal models
The majority of supervisors reported
having a current or planned preapplication process in place.
Where current/proposed pre-application processes were
detailed, these typically consisted of three stages, namely
the:
• collection of information from the undertakings -
typically by means of questionnaires, but sometimes through
onsite visits/inspections;
• desk-based review/analysis of
the relevant information; and
• follow-up action (e.g. onsite
visits/inspections, meetings with undertakings).
The
majority of supervisors who have organisational arrangements in
place, have established special teams to deal with the
pre-application – often comprised of a variety of experts
(e.g. supervisors, actuaries and model experts).
In respect
of a minority of respondents, these special teams are
supported by Steering Committees – in which discussion of the
approach of the relevant respondents to internal model issues
(e.g. criteria for assessment /approval of internal model) has
taken/will take place.
Respondents typically did not report
using (or their intention to use) external consultants to
develop internal organisational arrangements in this area.
However, one respondent intends to use their services.
Number of undertakings
Respondents provided the following
details of the number of insurance undertakings/groups already
in (or expected to be in) the pre-application stage:
•
0-10 undertakings/groups (14 countries);
• 11-20
undertakings/groups (4 countries);
• 21-30
undertakings/groups (3 countries); and
• Over 31
undertakings/groups (4 countries).
In respect of the
three authorities that reported over 30 undertakings the figures
provided ranged from 42 to 110 undertakings (including groups).
Typically, respondents reporting the higher number of
actual/expected undertakings tended to have pre-application
processes in place.
Nature of undertakings
The nature
of the undertakings expected to be/actually in the
pre-application process differed.
Whilst supervisors
predominately reported groups or undertakings forming part of a
group, several also noted large and/or medium sized
undertakings, and some a mixture, for example: mainly large
undertakings, but some small; large and small undertakings with
niche business; in addition to some small and medium
undertakings and those forming part of a group.
Colleges
of Supervisors
In respect of those authorities which are Lead
Supervisors of groups, only half have active Colleges of
Supervisors (Colleges) in place.
Where Colleges have
been established, the issue of how internal models should be
addressed is a major issue under consideration.
However,
respondents recognise that Colleges constitute important forum
for discussion of, and decisions on, internal models.
One referred to concrete action taken from an internal model
perspective (i.e. the organisation of a workshop on internal
model assessment/approval).
Third Country Parents
Supervisors are still largely considering the issue of
undertakings with third country parents.
In addition to
recognising the need for greater collaboration/cooperation –
including through Colleges – respondents recognised the
importance, and were awaiting the outcome, of equivalence
assessments and Commission Decisions on equivalence.
Human Resource
All but three authorities reported
increases
in the number of staff dealing with internal models.
In most
instances, these could broadly be classified as small (clearly
the quantitative significance of any change must be judged
within the context of the particular circumstances of the
undertaking) – usually 1/2 additional persons, and typically
(but not always) in the area of supervision.
However,
three authorities reported substantial increases – one outlining
a ‘graduated’ approach, reflecting an increase in staff in the
years leading up to the implementation of Solvency II (peaking
in 2011-12), and a decline in
respect of subsequent years.
Pillar II requirements
System of Governance
The
majority of supervisors (15) have up to now not required
individual undertakings to assess their System of Governance key
functions and requirements as described in CEIOPS Level 2
advice, while one third of the
respondents have started the
process but has not yet finished it.
However, in a few
cases the current regulation is already in line with CEIOPS’
advice.
ORSA
About half of the supervisors (13)
have already started or will start requiring the individual
undertakings to assess their own risk profile by way of
conducting an Own Risk and Solvency Assessment (ORSA) or a
similar
exercise.
In some jurisdictions those
undertakings which will (or have expressed their intention to)
apply for the (pre-) application of internal model will be
required to conduct an ORSA.
MCR and SCR as solvency
control levels
Two thirds of the supervisors have already
adapted or will have to adapt their supervisory approach in
order to assess the undertakings’ compliance with the Solvency
Capital Requirement (SCR) and Minimum Capital Requirement (MCR)
as well as to be able to take appropriate supervisory action in
case of a breach of the SCR or MCR.
They underlined that
the supervisory approach has to be changed, and there is the
need to adapt the way the calculation of the SCR/MCR is
reviewed.
Supervisory Review Process
Concerning the
Supervisory Review Process, in the vast majority of countries
the assessment of what changes in the supervisory framework are
needed to be able to conduct a risk assessment is underway.
Some respondents have already implemented tools for a risk
based approach or are developing one.
Risk Assessment
Most of the supervisors (20) have dealt or have started dealing
with the assessment of the individual undertakings’ risk profile
taking into account the Risk Assessment framework as set out in
CEIOPS’ Issues Paper of August
2008.
Supervisory
reporting and public disclosure
It was emphasised that
keeping reporting requirements which are not in line with
Solvency II or overlap with the Solvency II requirements should
be avoided. Some of the responding supervisors intend to keep
(some) existing
reporting requirements or not solvency
related reporting requirements or national specificities not
within the scope of Solvency II.
Group supervision
Work plans: group solvency requirements
The majority of
supervisors do not have work plans in place for the
implementation of group solvency requirements under Solvency II.
Work plans (where in existence) are often in an early
stage of development.
Several work plans are based
around participation in Colleges of Supervisors.
Colleges: Participation Strategy
The majority of
respondents have plans to develop their arrangements for, and
enhance their participation in, Colleges.
Several
respondents made reference to the importance of collaborative
working in Colleges within the context of internal model
pre-application and approval.
Colleges: Resource
Implications
Participation in Colleges will, for the majority
of supervisors, have resource implications (financial and
non-financial) – although these are still (in the case of all
respondents) to be precisely determined.
The resource
implications are largely attributable to the need for additional
staff and the corresponding financial implications, including
those associated with training.
Human resources needs
will be met through the reallocation of staff to Solvency II
related tasks, and/or the recruitment of new staff.
Additional travel costs were also noted by some authorities.
One indicated its inability immediately to meet any increase
in staffing requirements.
Third country undertakings:
equivalence
In respect of those supervisors who assume
responsibility for groups with third country parents or
subsidiaries, there is an almost equal division between those
who have considered the implications of third country
equivalence requirements and discussed the issues with the
relevant groups and those who have not considered the
implications and/or discussed the issue with the groups in
question.
Where equivalence has been considered, in many
instances, the supervisors have raised associated issues with
the other relevant supervisory authorities, in addition to the
groups concerned.
Issues discussed include:
insufficiently developed solvency requirements and supervisory
structures; the impact of third country rules on internal model
planning; and parent solvency calculations.
Other issues
to which supervisors have given consideration (i.e.
confidentiality; participation of third country supervisors in
Colleges) and in respect of which action may have been taken
(e.g. stakeholder meetings to
discuss equivalence issues)
were reported.
Institutional organisation of the
supervisory authority
Main departments involved
All
authorities mentioned several departments involved or planned to
be involved in Solvency II.
Supervision departments are
involved in Solvency II and related activities at all
supervisory authorities.
Actuarial departments or
functions are mentioned as involved by nearly all.
Other
departments/functions participating in the implementation at
most of the supervisory authorities are statistics, reporting,
monitoring.
Legal aspects – both licensing and
enforcement – are mentioned as involved or planned to be
involved by the major part of supervisory authorities, while the
involvement of IT departments or computer services is mentioned
explicitly only by four members.
Some authorities have
already involved or envisage involving also their international
affairs department.
Need to change the structure
One
third of the supervisors expressly envisage changes in the
structure of the supervisory authority for implementing Solvency
II.
Some of them mentioned also the increase or the need
of an increase of resources, while others only plan
restructuring at this stage.
One supervisor has already
set up new organisational units within the authority, but
envisages the possibility of the need for further changes.
From among those supervisors seeing no need for further
changes there are some with recent structural changes; therefore
they envisage no further significant changes.
Two other
supervisors though do not plan, but do not exclude either, some
minor changes if deemed necessary or to enhance the efficiency
of supervision.
One supervisor will make any kind of
decision in this respect only after the final drafts of Level 2
implementing measures will be known.
Major constraints
As to the main constraints to changing the supervisory tools and
powers supervisors consider human resources, budget and
expertise/knowledge/new competencies required as the most
critical ones.
Most of the supervisors are faced with the
problem of lack of human resources in general or with that of
the lack of staff with the adequate knowledge and competences.
Eleven supervisors mention budget as a major constraint,
mostly in combination with human resources or lack of expertise.
The powers of quite a few supervisors are defined by the
legislator. In the case of the supervisory authorities where the
employees are civil servants, also human resources and budget
are subject to rigid regulations that do not allow them at all
or in the better case just make it a very circuitous process to
hire new staff or to spend more on the development of new
supervisory tools or on the education of their staff.
At
this stage there are only two supervisory authorities who do not
feel any significant or major constraints to changing their
supervisory tools or powers.
Human resources
Number of
staff
The trend observed by the supervisors (16) who
estimated the development of staff figures in the next two years
shows that authorities on average will increase their staff by
20%, including 3 authorities mantaining the same
number of
staff, 7 supervisors increasing their staff by 5 to 25% and 6
supervisors foreseeing a development over 35%.
Nonetheless, some supervisors (9) were not in the position to
estimate the staff developments in the near future or in
relation with Solvency II and one supervisor provided partial
estimates only.
When it comes to the recruitment process,
most countries have indicated difficulties in recruiting staff
with Solvency II knowledge, such as internal models experts or
mathematicians with practical actuarial experience.
The
biggest challenge faced by supervisors is the competition in the
market, as the industry can offer better remuneration packages
to recruit skilled staff.
This is linked to the fact that
most authorities’ budgets are subject to public sector rules and
pay scales, which may be adjusted to the economic situation,
making it harder to acquire the additional resources or to offer
competitive salaries.
Two respondents have not
encountered significant difficulties in recruiting experienced
staff.
To overcome this constrain, some supervisors
propose:
• to raise the capability of own staff, by
providing them with specialised training as well as assisting
them financially to pursue further studies;
• to increase
secondments/mixed working groups from industry and consultancy
firms to help in the preparations for Solvency II;
• to
establish collaboration with Universities or training centres to
promote the development of courses and degrees to meet current
demands.
Training
Training organised by individual
supervisors
Many supervisors (22) develop Solvency II
training for their staff, with a frequency varying from ad hoc
courses to regular training programmes.
The most common
topics addressed by these trainings are:
• Quantitative
aspects of Solvency II (Technical Provisions, Capital
Requirements and Own Funds)
• Qualitative aspects of
Solvency II (ORSA and Governance System)
• Supervision
and Reporting aspects of Solvency II
• QIS5.
The
providers of training range from the private sector, such as
consultancy firms, academics and experts from big international
players, to staff from the authorities, such as national experts
and members of CEIOPS working groups.
One supervisor
mentioned receiving training by other supervisors, through the
twinning project or other type of programmes.
Topics
outsourced to external providers include: IT systems in the
context of Solvency II, standard formula, internal models,
internal controls and risk management.
Some supervisors
(9) reported having been requested to provide training to the
industry.
A reduced number of authorities are quite
engaged with the industry through the organisation of regular
meetings and fora, in which they inform the industry about the
progress of Solvency II and possible requirements for the
future.
Among the main topics requested by the industry
are: internal models, SCR, Market consistent embedded value
pre-application process, QIS5 workshops, ORSA and Group issues.
Typically authorities rely on the support of private
sector associations to develop training for market participants,
such as actuaries associations, insurance undertakings, chamber
of industry, etc.
In general, there is a need of the
industry for further training and supervisors already involved
are willing to continue to provide it, whilst others anticipate
receiving this type of request in the near future.
CEIOPS
training
CEIOPS training was praised by a number of
supervisors, who found CEIOPS seminars very useful and the
training programme to be covering a great number of the topics
currently needed.
Moreover, CEIOPS training is seen as
an opportunity for many authorities to train their staff
regularly on Solvency II matters and also as a way to alleviate
the financial burden of offering local training.
The list
below highlights the new topics suggested:
- Application
of proportionality principle
- Application of equivalence
principles
- Setting up parameters and scenarios for the
calculation of Pillar I requirements at national level / SCR
calculation
- Technical provisions (valuation of option,
scenarios generator, valuation of uncertainties)
-
Training the trainer (to ensure that the new prudential
requirements and the necessary knowledge in each supervisory
authority are pushed forward)
- Level 3 developments and
any initiative to increase supervisory practices
- Case
studies on national experiences in implementing Solvency II
- On-site inspections
- Capital add-on (advanced,
with case studies)
- Market consistent embedded value
- Own funds – classification and eligibility (advanced, with
case studies)
Some suggestions were also given on how to
improve CEIOPS seminars:
• To target different levels, so
that separate training are offered for experts/specialists and
beginners
• Case study is suggested as the preferable
form of training (in view of the implementation of Solvency II).
• 2 days training devoted to one specific topic in detail,
rather than to several (even related) topics but more generally.
Training aids to be developed by CEIOPS
Some
countries suggested that CEIOPS could develop several training
aids, such as:
• Exchange of material among authorities
on specific topics at national level
• Sharing
presentations from seminars provided by CEIOPS
• A
Solvency II discussion board/forum as possibility to discuss
specific problems with other supervisors
• Organisation
of meetings with implementation project managers to foster
better implementation and exchange of ideas
• Aids for
supervisory colleges and for the validation of internal model
• An IT-based training tool for comprehensive knowledge
of the framework, like FSI connect, etc.
• Q&A procedure
with the trainers (for about one month after a training).
Among the suggestions, a few are already in place or in the
pipeline for development.
CEIOPS seminar
materials/presentations are systematically uploaded in the
‘supervisory culture’ section of the Members’ area.
CEIOPS is working on the creation of a library of presentations
to be launched with its new website, which could be used as a
reference for supervisors at national level on the Solvency II
framework and include practical examples.
This tool will
be equipped with a search function.
Further suggestions
are still to be analysed by CEIOPS.
Staff exchange
The
major part of respondents expressed their preference for an
exchange in the following Solvency II areas:
1. Internal
model assessment
2. Assessment of Enterprise risk
management and stress test
3. Group supervision
4.
Other areas: implementation of Solvency II, Pillar I, Pillar II,
technical provisions, SRP, ORSA and IT (actuarial, statistical
and financial supervisory software)
One third of the
supervisors (9) indicated the wish to increase the current level
of staff exchange. Whilst a number of authorities (11) are in
the process of scheduling several staff exchange programmes,
others (3) are faced with constraints in sending staff due to
the small size of the authority or the unclear perspectives
faced by the supervisors.
Moreover, a few supervisors
feel that they cannot meet the demand on staff exchange due to
their limited financial capabilities.
Among the
authorities who favour staff exchange, the promotion of such
programmes is mainly done through the HR department, the staff
exchange policy for each division, advertisement through
newsletters or following the
institutional strategy
(bilaterally).
IT
The majority of the responding
supervisors have already made some steps to assess the necessary
changes in the IT field.
Many of those judging their IT
preparedness “underway” mentioned that at the present stage the
information available on the future requirements on supervisory
reporting or on reporting to EIOPA is scarce to make complete
analysis.
However, one third of the supervisory
authorities claim not to have started the analysis of the
required changes.
Others
Use of external
consultants-third party providers
Half of the supervisors
have plans to make use of external consultants in preparing for
Solvency II.
The other half explicitly do not want to
involve third party providers in their preparations.
Two
authorities have not made definite decision on this issue, they
will involve external consultants only if there will be a need
in the future.
Some supervisors have already involved or
intend to involve external consultants in training their staff
and completing their competences, in IT issues, in legal
aspects, in actuarial issues or explicitly in the internal model
assessment process.
One supervisor plans to outsource
the whole IT development to a third party.
One intends
to involve an external legal advisor and also an actuarial
expert in drafting the law and the implementing measures.
One authority anticipates even hiring temporary staff to
cover short-term resource shortages.
Supervisory
Convergence
All responding supervisors are engaging in
one way and/or another with other supervisors in respect of
Solvency II.
CEIOPS working groups and bilateral contacts
– with special regard to regional contacts – are mentioned by
the majority of supervisors as the main fora or means of
engaging with other supervisors.
Participation in the
work of Colleges of Supervisors is also considered to contribute
to supervisory convergence.
Mention was made of
participation in EIOPC work by two supervisors; others
appreciate also seminars, study visits or twinning projects.
One supervisor mentioned the participation in
pre-applications of internal models with other supervisors.
Communication with other stakeholders
All supervisors
reported active, on-going collaboration with other stakeholders.
The overwhelming majority have on-going working relations
with the associations of insurers, with the Ministry of Finance
and with the actuarial associations.
Other associations
such as of accountants, auditors or other trade associations are
also among the partners of several supervisors.
A few
supervisors collaborate also with the central bank, with other
ministries or the government.
Those co-operating with
the associations of insurers normally collaborate also with the
Ministry of Finance and the actuarial association.
In
some cases coordination groups or multilateral committees
provide for a structural framework for the on-going
collaboration with these partners.
The US Dodd Frank Act: A major step for Solvency II
Equivalence in the USA
The US Dodd-Frank Wall Street Reform and
Consumer Protection Act (the “Dodd-Frank Act”) has
already changed the insurance and reinsurance industry in the
United States.
The Dodd-Frank Act, which has several
provisions that affect insurers and reinsurers, is only the
beginning. The Federal Insurance Office (“FIO”) will make
recommendations for major legislative, administrative and
regulatory changes.
DODD FRANK ACT TITLE V—INSURANCE
Subtitle A—Federal Insurance Office
SEC. 501. SHORT TITLE.
This subtitle may be cited as the
‘‘Federal Insurance Office Act of 2010’’.
SEC. 502. FEDERAL INSURANCE OFFICE.
(a) ESTABLISHMENT OF OFFICE.—Subchapter I of chapter 3 of
subtitle I of title 31, United States Code, is amended—
(1) by redesignating section 312 as section 315;
(2) by
redesignating section 313 as section 312; and
(3) by
inserting after section 312 (as so redesignated) the following
new sections:
‘‘SEC. 313. FEDERAL
INSURANCE OFFICE.
‘‘(a) ESTABLISHMENT.—There is
established within the Department of the Treasury the Federal
Insurance Office.
‘‘(b) LEADERSHIP.—The Office
shall be headed by a Director, who shall be appointed by the
Secretary of the Treasury.
The position of Director
shall be a career reserved position in the Senior Executive
Service, as that position is defined under section 3132 of title
5, United States Code.
‘‘(c) FUNCTIONS.—
‘‘(1)
AUTHORITY PURSUANT TO DIRECTION OF SECRETARY.—
The
Office, pursuant to the direction of the Secretary, shall have
the authority—
‘‘(A) to monitor all
aspects of the insurance industry, including identifying issues
or gaps in the regulation of insurers that could contribute to a
systemic crisis in the insurance industry or the United States
financial system;
‘‘(B) to monitor the extent to
which traditionally underserved communities and consumers,
minorities (as such term is defined in section 1204(c) of the
Financial Institutions Reform, Recovery, and Enforcement Act of
1989 (12 U.S.C. 1811 note)), and low- and moderate-income
persons have access to affordable insurance products regarding
all lines of insurance, except health insurance;
‘‘(C) to
recommend to the Financial Stability Oversight Council that it
designate an insurer, including the affiliates of such insurer,
as an entity subject to regulation as a nonbank financial
company supervised by the Board of Governors pursuant to title I
of the Dodd-Frank Wall Street Reform and Consumer Protection
Act;
‘‘(D) to assist the Secretary in administering the
Terrorism Insurance Program established in the Department of the
Treasury under the Terrorism Risk Insurance Act of 2002 (15
U.S.C. 6701 note);
‘‘(E) to coordinate Federal efforts
and develop Federal policy on prudential aspects of
international insurance matters,
including representing the United States, as appropriate, in the
International Association of Insurance
Supervisors (or a successor entity) and assisting the
Secretary in negotiating covered agreements (as such term is
defined in subsection (r));
‘‘(F) to determine, in
accordance with subsection (f), whether State insurance measures
are preempted by covered agreements;
‘‘(G) to consult
with the States (including State insurance regulators) regarding
insurance matters of national importance and prudential
insurance matters of international importance; and
‘‘(H)
to perform such other related duties and authorities as may be
assigned to the Office by the Secretary.
‘‘(2) ADVISORY
FUNCTIONS.—The Office shall advise the Secretary on major
domestic and prudential international insurance policy issues.
‘‘(3) ADVISORY CAPACITY ON COUNCIL.—The Director shall serve
in an advisory capacity on the Financial Stability Oversight
Council established under the Financial Stability Act of 2010.
‘‘(d) SCOPE.—The authority of the Office shall extend to all
lines of insurance except—
‘‘(1) health insurance, as
determined by the Secretary in coordination with the Secretary
of Health and Human Services based on section 2791 of the Public
Health Service Act (42
U.S.C. 300gg–91);
‘‘(2)
long-term care insurance, except long-term care insurance that
is included with life or annuity insurance components, as
determined by the Secretary in coordination with the Secretary
of Health and Human Services, and in the case of long-term care
insurance that is included with such components, the Secretary
shall coordinate with the Secretary of Health and Human Services
in performing the functions of the Office; and
‘‘(3) crop
insurance, as established by the Federal Crop Insurance Act (7
U.S.C. 1501 et seq.).
‘‘(e)
GATHERING OF INFORMATION.—
‘‘(1) IN GENERAL.—In
carrying out the functions required under subsection (c), the
Office may—
‘‘(A) receive and collect data and
information on and from the insurance industry and insurers;
‘‘(B) enter into information-sharing agreements;
‘‘(C) analyze and disseminate data and information; and
‘‘(D) issue reports regarding all lines of insurance except
health insurance.
‘‘(2) COLLECTION
OF INFORMATION FROM INSURERS AND AFFILIATES.—
‘‘(A) IN GENERAL.—Except as provided in paragraph (3), the
Office may require an insurer, or any affiliate of an insurer,
to submit such data or information as the Office may reasonably
require in carrying out the functions described under subsection
(c).
‘‘(B) RULE OF CONSTRUCTION.—Notwithstanding any
other provision of this section, for purposes of subparagraph
(A), the term ‘insurer’ means any entity that writes insurance
or reinsures risks and issues contracts or policies in 1 or more
States.
‘‘(3) EXCEPTION FOR SMALL INSURERS.—Paragraph (2)
shall not apply with respect to any insurer or affiliate thereof
that meets a minimum size threshold that the Office may
establish, whether by order or rule.
‘‘(4) ADVANCE
COORDINATION.—Before collecting any data or information under
paragraph (2) from an insurer, or affiliate of an insurer, the
Office shall coordinate with each relevant Federal agency and
State insurance regulator (or other relevant Federal or State
regulatory agency, if any, in the case of an affiliate of an
insurer) and any publicly available sources to determine if the
information to be collected is available from, and may be
obtained in a timely manner by, such Federal agency or State
insurance regulator, individually or collectively, other
regulatory agency, or publicly available sources.
If the
Director determines that such data or information is available,
and may be obtained in a timely manner, from such an agency,
regulator, regulatory agency, or source, the Director shall
obtain the data or information from such agency, regulator,
regulatory agency, or source.
If the Director determines
that such data or information is not so available, the Director
may collect such data or information from an insurer (or
affiliate) only if the Director complies with the requirements
of subchapter I of chapter 35 of title 44, United States Code
(relating to Federal information policy; commonly known as the
Paperwork Reduction Act), in collecting such data or
information.
Notwithstanding any other provision of law,
each such relevant Federal agency and State insurance regulator
or other Federal or State regulatory agency is authorized to
provide to the Office such
data or information.
‘‘(5)
CONFIDENTIALITY.—
‘‘(A)
RETENTION OF PRIVILEGE.—The submission of any nonpublicly
available data and information to the Office under this
subsection shall not constitute a waiver of, or otherwise
affect, any privilege arising under Federal or State law
(including the rules of any Federal or State court) to which the
data or information is otherwise subject.
‘‘(B) CONTINUED
APPLICATION OF PRIOR CONFIDENTIALITY AGREEMENTS.—Any requirement
under Federal or State law to the extent otherwise applicable,
or any requirement pursuant to a written agreement in effect
between the original source of any nonpublicly available data or
information and the source of such data or information to the
Office, regarding the privacy or confidentiality of any data or
information in the possession of the source to the Office, shall
continue to apply to such data or information after the data or
information has been provided pursuant to this subsection to the
Office.
‘‘(C) INFORMATION-SHARING AGREEMENT.—Any data or
information obtained by the Office may be made available to
State insurance regulators, individually or collectively,
through an information-sharing agreement that—
‘‘(i)
shall comply with applicable Federal law; and
‘‘(ii)
shall not constitute a waiver of, or otherwise affect, any
privilege under Federal or State law (including the rules of any
Federal or State court) to which the data or information is
otherwise subject.
‘‘(D) AGENCY DISCLOSURE
REQUIREMENTS.—Section 552 of title 5, United States Code, shall
apply to any data or information submitted to the Office by an
insurer or an affiliate of an insurer.
‘‘(6) SUBPOENAS
AND ENFORCEMENT.—The Director shall have the power to require by
subpoena the production of the data or information requested
under paragraph (2), but only upon a written finding by the
Director that such data or information is required to carry out
the functions described under subsection (c) and that the Office
has coordinated with such regulator or agency as required under
paragraph (4).
Subpoenas shall bear the signature of the
Director and shall be served by any person or class of persons
designated by the Director for that purpose. In the case of
contumacy or failure to obey a subpoena, the subpoena shall be
enforceable by order of any appropriate district court of the
United States.
Any failure to obey the order of the court
may be punished by the court as a contempt of court.
‘‘(f) PREEMPTION OF STATE INSURANCE MEASURES.—
‘‘(1)
STANDARD.—A State insurance measure shall be preempted pursuant
to this section or section 314 if, and only to the extent that
the Director determines, in accordance with this subsection,
that the measure—
‘‘(A) results in less favorable
treatment of a non-United States insurer domiciled in a foreign
jurisdiction that is subject to a covered agreement than a
United States insurer domiciled, licensed, or otherwise admitted
in that State; and
‘‘(B) is inconsistent with a covered
agreement.
‘‘(2) DETERMINATION.—
‘‘(A) NOTICE OF
POTENTIAL INCONSISTENCY.—Before making any determination under
paragraph (1), the Director shall—
‘‘(i) notify and
consult with the appropriate State regarding any potential
inconsistency or preemption;
‘‘(ii) notify and consult
with the United States Trade Representative regarding any
potential inconsistency or preemption;
‘‘(iii) cause to
be published in the Federal Register notice of the issue
regarding the potential inconsistency or preemption, including a
description of each State insurance measure at issue and any
applicable covered agreement;
‘‘(iv) provide interested
parties a reasonable opportunity to submit written comments to
the Office; and
‘‘(v) consider any comments received.
‘‘(B) SCOPE OF REVIEW.—For purposes of this subsection, any
determination of the Director regarding State insurance
measures, and any preemption under paragraph (1) as a result of
such determination, shall be limited to the subject matter
contained within the covered agreement involved and shall
achieve a level of protection for insurance or reinsurance
consumers that is substantially equivalent to the level of
protection achieved under State insurance or reinsurance
regulation.
‘‘(C) NOTICE OF DETERMINATION OF
INCONSISTENCY.—
Upon making any determination under
paragraph (1), the Director shall—
‘‘(i) notify the
appropriate State of the determination and the extent of the
inconsistency;
‘‘(ii) establish a reasonable period of
time, which shall not be less than 30 days, before the
determination shall become effective; and
‘‘(iii) notify
the Committees on Financial Services and Ways and Means of the
House of Representatives and the Committees on Banking, Housing,
and Urban Affairs and Finance of the Senate.
‘‘(3) NOTICE
OF EFFECTIVENESS.—Upon the conclusion of the period referred to
in paragraph (2)(C)(ii), if the basis for such determination
still exists, the determination shall become effective and the
Director shall—
‘‘(A) cause to be published a notice in
the Federal Register that the preemption has become effective,
as well as the effective date; and
‘‘(B) notify the
appropriate State.
‘‘(4) LIMITATION.—No State may enforce
a State insurance measure to the extent that such measure has
been preempted under this subsection.
‘‘(g) APPLICABILITY
OF ADMINISTRATIVE PROCEDURES ACT.—
Determinations of
inconsistency made pursuant to subsection (f)(2) shall be
subject to the applicable provisions of subchapter II of chapter
5 of title 5, United States Code (relating to administrative
procedure), and chapter 7 of such title (relating to judicial
review), except that in any action for judicial review of a
determination of inconsistency, the court shall determine the
matter de novo.
‘‘(h) REGULATIONS,
POLICIES, AND PROCEDURES.
—The Secretary may issue
orders, regulations, policies, and procedures to implement this
section.
‘‘(i) CONSULTATION.—The Director shall consult
with State insurance regulators, individually or collectively,
to the extent the Director determines appropriate, in carrying
out the functions of the Office.
‘‘(j) SAVINGS
PROVISIONS.—Nothing in this section shall—
‘‘(1) preempt—
‘‘(A) any State insurance measure that governs any insurer’s
rates, premiums, underwriting, or sales practices;
‘‘(B)
any State coverage requirements for insurance;
‘‘(C) the
application of the antitrust laws of any State to the business
of insurance; or
‘‘(D) any State insurance measure
governing the capital or solvency of an insurer, except to the
extent that such State insurance measure results in less
favorable treatment of a non-United State insurer than a United
States insurer;
‘‘(2) be construed to alter, amend, or
limit any provision of the Consumer Financial Protection Agency
Act of 2010; or
‘‘(3) affect the preemption of any State
insurance measure otherwise inconsistent with and preempted by
Federal law.
‘‘(k) RETENTION OF EXISTING STATE REGULATORY
AUTHORITY.—
Nothing in this section or section 314 shall
be construed to establish or provide the Office or the
Department of the Treasury with general supervisory or
regulatory authority over the business of
insurance.
‘‘(l) RETENTION OF AUTHORITY OF FEDERAL FINANCIAL REGULATORY
AGENCIES.
—Nothing in this section or section 314 shall
be construed to limit the authority of any Federal financial
regulatory agency, including the authority to develop and
coordinate policy, negotiate, and enter into agreements with
foreign governments, authorities, regulators, and multinational
regulatory committees and to preempt State measures to affect
uniformity with international regulatory agreements.
‘‘(m) RETENTION OF AUTHORITY OF UNITED STATES TRADE
REPRESENTATIVE.—
Nothing in this section or section 314
shall be construed to affect the authority of the Office of the
United States Trade Representative pursuant to section 141 of
the Trade Act of 1974 (19 U.S.C. 2171) or any other provision of
law, including authority over the development and coordination
of United States international trade policy and the
administration of the United States trade agreements program.
‘‘(n) ANNUAL REPORTS TO CONGRESS.—
‘‘(1) SECTION
313(f) REPORTS.—Beginning September 30, 2011, the Director shall
submit a report on or before September 30 of each calendar year
to the President and to the Committees on Financial Services and
Ways and Means of the House of Representatives and the
Committees on Banking, Housing, and Urban Affairs and Finance of
the Senate on any actions taken by the Office pursuant to
subsection (f) (regarding preemption of inconsistent State
insurance measures).
‘‘(2) INSURANCE INDUSTRY.—Beginning
September 30, 2011, the Director shall submit a report on or
before September 30 of each calendar year to the President and
to the Committee on Financial Services of the House of
Representatives and the Committee on Banking, Housing, and Urban
Affairs of the Senate on the insurance industry and any other
information as deemed relevant by the Director or requested by
such Committees.
‘‘(o) REPORTS ON
U.S. AND GLOBAL REINSURANCE MARKET.—
The Director
shall submit to the Committee on Financial Services of the House
of Representatives and the Committee on Banking, Housing, and
Urban Affairs of the Senate—
‘‘(1) a report received not
later than September 30, 2012, describing the breadth and scope
of the global reinsurance market and the critical role such
market plays in supporting insurance in the United States; and
‘‘(2) a report received not later than January 1, 2013, an
updated not later than January 1, 2015, describing the impact of
part II of the Nonadmitted and Reinsurance Reform Act of 2010 on
the ability of State regulators to access reinsurance
information for regulated companies in their jurisdictions.
‘‘(p) STUDY AND REPORT ON REGULATION OF INSURANCE.—
‘‘(1) IN GENERAL.—Not later than 18 months after the date of
enactment of this section, the Director shall conduct a study
and submit a report to Congress on how to modernize and
improve the system of insurance regulation in the United States.
‘‘(2) CONSIDERATIONS.—The study and report required under
paragraph (1) shall be based on and guided by the following
considerations:
‘‘(A) Systemic risk regulation with
respect to insurance.
‘‘(B) Capital standards and the
relationship between capital allocation and liabilities,
including standards relating to liquidity and duration risk.
‘‘(C) Consumer protection for insurance products and
practices, including gaps in State regulation.
‘‘(D) The
degree of national uniformity of State insurance regulation.
‘‘(E) The regulation of insurance companies and affiliates
on a consolidated basis.
‘‘(F) International coordination
of insurance regulation.
‘‘(3) ADDITIONAL FACTORS.—The
study and report required under paragraph (1) shall also examine
the following factors:
‘‘(A) The costs and benefits of
potential Federal regulation of insurance across various lines
of insurance (except health insurance).
‘‘(B) The
feasibility of regulating only certain lines of insurance at the
Federal level, while leaving other lines of insurance to be
regulated at the State level.
‘‘(C) The ability of any
potential Federal regulation or Federal regulators to eliminate
or minimize regulatory arbitrage.
‘‘(D) The impact that
developments in the regulation of insurance in foreign
jurisdictions might have on the potential Federal regulation of
insurance.
‘‘(E) The ability of any potential Federal
regulation or Federal regulator to provide robust consumer
protection for policyholders.
‘‘(F) The potential
consequences of subjecting insurance companies to a Federal
resolution authority, including the effects of any Federal
resolution authority—
‘‘(i) on the operation of State
insurance guaranty fund systems, including the loss of guaranty
fund coverage if an insurance company is subject to a Federal
resolution authority;
‘‘(ii) on policyholder protection,
including the loss of the priority status of policyholder claims
over other unsecured general creditor claims;
‘‘(iii) in
the case of life insurance companies, on the loss of the special
status of separate account assets and separate account
liabilities; and
‘‘(iv) on the international
competitiveness of insurance companies.
‘‘(G) Such other
factors as the Director determines necessary or appropriate,
consistent with the principles set forth in paragraph (2).
‘‘(4) REQUIRED RECOMMENDATIONS.—The study and report
required under paragraph (1) shall also contain any legislative,
administrative, or regulatory recommendations, as the Director
determines appropriate, to carry out or effectuate the findings
set forth in such report.
‘‘(5) CONSULTATION.—With
respect to the study and report required under paragraph (1),
the Director shall consult with the State insurance regulators,
consumer organizations, representatives of the insurance
industry and policyholders, and other organizations and experts,
as appropriate.
‘‘(q) USE OF EXISTING RESOURCES.—To carry
out this section, the Office may employ personnel, facilities,
and any other resource of the Department of the Treasury
available to the Secretary and the Secretary shall dedicate
specific personnel to the Office.
‘‘(r)
DEFINITIONS.—In this section and section
314, the following definitions shall apply:
‘‘(1)
AFFILIATE.—The term ‘affiliate’
means, with respect to an insurer, any person who controls, is
controlled by, or is under common control with the insurer.
‘‘(2) COVERED AGREEMENT.—The
term ‘covered agreement’ means a written bilateral or
multilateral agreement regarding prudential measures with
respect to the business of insurance or reinsurance that—
‘‘(A) is entered into between the United States and one or
more foreign governments, authorities, or regulatory entities;
and
‘‘(B) relates to the recognition of prudential
measures with respect to the business of insurance or
reinsurance that achieves a level of protection for insurance or
reinsurance consumers that is substantially equivalent to the
level of protection achieved under State insurance or
reinsurance regulation.
‘‘(3)
INSURER.—The term ‘insurer’ means any person engaged in
the business of insurance, including
reinsurance.
‘‘(4) FEDERAL
FINANCIAL REGULATORY AGENCY.—The term ‘Federal financial
regulatory agency’ means the Department of the Treasury, the
Board of Governors of the Federal Reserve System, the Office of
the Comptroller of the Currency, the Office of Thrift
Supervision, the Securities and Exchange Commission, the
Commodity Futures Trading Commission, the Federal Deposit
Insurance Corporation, the Federal Housing Finance Agency, or
the National Credit Union Administration.
‘‘(5)
NON-UNITED STATES INSURER.—The term
‘non-United States insurer’ means an insurer that is organized
under the laws of a jurisdiction other than a State, but does
not include any United States branch of such an insurer.
‘‘(6) OFFICE.—The term ‘Office’
means the Federal Insurance Office established by this section.
‘‘(7) STATE INSURANCE MEASURE.—The
term ‘State insurance measure’ means any State law, regulation,
administrative ruling, bulletin, guideline, or practice relating
to or affecting prudential measures applicable to insurance or
reinsurance.
‘‘(8) STATE INSURANCE
REGULATOR.—The term ‘State insurance regulator’ means any
State regulatory authority responsible for the supervision of
insurers.
‘‘(9) SUBSTANTIALLY
EQUIVALENT TO THE LEVEL OF PROTECTION ACHIEVED.
—The term ‘substantially equivalent to the level of protection
achieved’ means the prudential measures of a foreign government,
authority, or regulatory entity achieve a similar outcome in
consumer protection as the outcome achieved under State
insurance or reinsurance regulation.
‘‘(10)
UNITED STATES INSURER.—The term
‘United States insurer’ means—
‘‘(A) an insurer that is
organized under the laws of a State; or
‘‘(B) a United
States branch of a non-United States insurer.
‘‘(s)
AUTHORIZATION OF APPROPRIATIONS.—There
are authorized to be appropriated for the Office for each fiscal
year such sums as may be necessary.
‘‘SEC.
314. COVERED AGREEMENTS.
‘‘(a) AUTHORITY.—The
Secretary and the United States Trade Representative are
authorized, jointly, to negotiate and enter into covered
agreements on behalf of the United States.
‘‘(b)
REQUIREMENTS FOR CONSULTATION WITH CONGRESS.—
‘‘(1) IN
GENERAL.—Before initiating negotiations to enter into a covered
agreement under subsection (a), during such negotiations, and
before entering into any such agreement, the Secretary and the
United States Trade Representative shall jointly consult with
the Committee on Financial Services and the Committee on Ways
and Means of the House of Representatives and the Committee on
Banking, Housing, and Urban Affairs and the Committee on Finance
of the Senate.
‘‘(2) SCOPE.—The consultation described in
paragraph (1) shall include consultation with respect to—
‘‘(A) the nature of the agreement;
‘‘(B) how and to
what extent the agreement will achieve the applicable purposes,
policies, priorities, and objectives of section 313 and this
section; and
‘‘(C) the implementation of the agreement,
including the general effect of the agreement on existing State
laws.
‘‘(c) SUBMISSION AND LAYOVER PROVISIONS.
—A
covered agreement under subsection (a) may enter into force with
respect to the United States only if—
‘‘(1) the
Secretary and the United States Trade Representative jointly
submit to the congressional committees specified in subsection
(b)(1), on a day on which both Houses of Congress are in
session, a copy of the final legal text of the agreement; and
‘‘(2) a period of 90 calendar days beginning on the date on
which the copy of the final legal text of the agreement is
submitted to the congressional committees under paragraph
(1) has expired.’’.
(b) DUTIES OF SECRETARY.—Section
321(a) of title 31, United States Code, is amended—
(1)
in paragraph (7), by striking ‘‘; and’’ and inserting a
semicolon;
(2) in paragraph (8)(C), by striking the
period at the end and inserting ‘‘; and’’; and
(3) by
adding at the end the following new paragraph:
‘‘(9)
advise the President on major domestic and international
prudential policy issues in connection with all lines of
insurance except health insurance.’’.
(c) CLERICAL
AMENDMENT.—The table of sections for subchapter I of chapter 3
of title 31, United States Code, is amended by striking the item
relating to section 312 and inserting the following new items:
Subtitle B—State-Based Insurance Reform
SEC. 511. SHORT TITLE.
This subtitle may be cited as the ‘‘Nonadmitted and
Reinsurance Reform Act of 2010’’.
SEC. 512. EFFECTIVE DATE.
Except as otherwise
specifically provided in this subtitle, this subtitle shall take
effect upon the expiration of the 12-month period beginning on
the date of the enactment of this subtitle.
PART I—NONADMITTED INSURANCE
SEC. 521. REPORTING, PAYMENT, AND
ALLOCATION OF PREMIUM TAXES.
(a) HOME STATE’S
EXCLUSIVE AUTHORITY.—No State other than the home State of an
insured may require any premium tax payment for nonadmitted
insurance.
(b) ALLOCATION OF NONADMITTED PREMIUM TAXES.—
(1) IN GENERAL.—The States may enter into a compact or
otherwise establish procedures to allocate among the States the
premium taxes paid to an insured’s home State described in
subsection (a).
(2) EFFECTIVE DATE.—Except as expressly
otherwise provided in such compact or other procedures, any such
compact or other procedures—
(A) if adopted on or before
the expiration of the 330- day period that begins on the date of
the enactment of this subtitle, shall apply to any premium taxes
that, on or after such date of enactment, are required to be
paid to any State that is subject to such compact or procedures;
and
(B) if adopted after the expiration of such 330-day
period, shall apply to any premium taxes that, on or after
January 1 of the first calendar year that begins after the
expiration of such 330-day period, are required to be paid to
any State that is subject to such compact or procedures.
(3) REPORT.—Upon the expiration of the 330-day period referred
to in paragraph (2), the NAIC may submit a report to the
Committee on Financial Services and the Committee on the
Judiciary of the House of Representatives and the Committee on
Banking, Housing, and Urban Affairs of the Senate identifying
and describing any compact or other procedures for allocation
among the States of premium taxes that have been adopted during
such period by any States.
(4) NATIONWIDE SYSTEM.—The
Congress intends that each State adopt nationwide uniform
requirements, forms, and procedures, such as an interstate
compact, that provide for the reporting, payment, collection,
and allocation of premium taxes for nonadmitted insurance
consistent with this section.
(c) ALLOCATION BASED ON TAX
ALLOCATION REPORT.
—To facilitate the payment of premium
taxes among the States, an insured’s home State may require
surplus lines brokers and insureds who have independently
procured insurance to annually file tax allocation reports with
the insured’s home State detailing the portion of the
nonadmitted insurance policy premium or premiums attributable to
properties, risks, or exposures located in each State.
The filing of a nonadmitted insurance tax allocation report and
the payment of tax may be made by a person authorized by the
insured to act as its agent.
SEC.
522. REGULATION OF NONADMITTED INSURANCE BY INSURED’S HOME
STATE.
(a) HOME STATE AUTHORITY.—Except as
otherwise provided in this section, the placement of nonadmitted
insurance shall be subject to the statutory and regulatory
requirements solely of the insured’s home State.
(b)
BROKER LICENSING.—No State other than an insured’s home State
may require a surplus lines broker to be licensed in order to
sell, solicit, or negotiate nonadmitted insurance with respect
to such insured.
(c) ENFORCEMENT PROVISION.—With respect
to section 521 and subsections (a) and (b) of this section, any
law, regulation, provision, or action of any State that applies
or purports to apply to nonadmitted insurance sold to, solicited
by, or negotiated with an insured whose home State is another
State shall be preempted with respect to such application.
(d) WORKERS’ COMPENSATION EXCEPTION.—This section may not be
construed to preempt any State law, rule, or regulation that
restricts the placement of workers’ compensation insurance or
excess insurance for self-funded workers’ compensation plans
with a nonadmitted insurer.
SEC.
523. PARTICIPATION IN NATIONAL PRODUCER DATABASE.
After the expiration of the 2-year period beginning on the date
of the enactment of this subtitle, a State may not collect any
fees relating to licensing of an individual or entity as a
surplus lines broker in the State unless the State has in effect
at such time laws or regulations that provide for participation
by the State in the national insurance producer database of the
NAIC, or any other equivalent uniform national database, for the
licensure of surplus lines brokers and the renewal of such
licenses.
SEC. 524. UNIFORM
STANDARDS FOR SURPLUS LINES ELIGIBILITY.
A State
may not—
(1) impose eligibility requirements on, or
otherwise establish eligibility criteria for, nonadmitted
insurers domiciled in a United States jurisdiction, except in
conformance with such requirements and criteria in sections
5A(2) and 5C(2)(a) of the Non-Admitted Insurance Model Act,
unless the State has adopted nationwide uniform requirements,
forms, and procedures developed in accordance with section
521(b) of this subtitle that include alternative nationwide
uniform eligibility requirements; or
(2) prohibit a
surplus lines broker from placing nonadmitted insurance with, or
procuring nonadmitted insurance from, a nonadmitted insurer
domiciled outside the United States that is listed on the
Quarterly Listing of Alien Insurers maintained by the
International Insurers Department of the NAIC.
SEC. 525. STREAMLINED APPLICATION FOR
COMMERCIAL PURCHASERS.
A surplus lines broker
seeking to procure or place nonadmitted insurance in a State for
an exempt commercial purchaser shall not be required to satisfy
any State requirement to make a due diligence search to
determine whether the full amount or type of insurance sought by
such exempt commercial purchaser can be obtained from admitted
insurers if—
(1) the broker procuring or placing the
surplus lines insurance has disclosed to the exempt commercial
purchaser that such insurance may or may not be available from
the admitted market that may provide greater protection with
more regulatory oversight; and
(2) the exempt commercial
purchaser has subsequently requested in writing the broker to
procure or place such insurance from a nonadmitted insurer.
SEC. 526. GAO STUDY OF NONADMITTED
INSURANCE MARKET.
(a) IN GENERAL.—The Comptroller
General of the United States shall conduct a study of the
nonadmitted insurance market to determine the effect of the
enactment of this part on the size and market share of the
nonadmitted insurance market for providing coverage typically
provided by the admitted insurance market.
(b)
CONTENTS.—The study shall determine and analyze—
(1) the
change in the size and market share of the nonadmitted insurance
market and in the number of insurance companies and insurance
holding companies providing such business in the 18-month period
that begins upon the effective date of this subtitle;
(2)
the extent to which insurance coverage typically provided by the
admitted insurance market has shifted to the nonadmitted
insurance market;
(3) the consequences of any change in
the size and market share of the nonadmitted insurance market,
including differences in the price and availability of coverage
available in both the admitted and nonadmitted insurance
markets;
(4) the extent to which insurance companies and
insurance holding companies that provide both admitted and
nonadmitted insurance have experienced shifts in the volume of
business between admitted and nonadmitted insurance; and
(5) the extent to which there has been a change in the number of
individuals who have nonadmitted insurance policies, the type of
coverage provided under such policies, and whether such coverage
is available in the admitted insurance market.
(c)
CONSULTATION WITH NAIC.—In conducting the study under this
section, the Comptroller General shall consult with the NAIC.
(d) REPORT.—The Comptroller General shall complete the study
under this section and submit a report to the Committee on
Banking, Housing, and Urban Affairs of the Senate and the
Committee on Financial Services of the House of Representatives
regarding the findings of the study not later than 30 months
after the effective date of this subtitle.
SEC. 527. DEFINITIONS.
For
purposes of this part, the following definitions shall apply:
(1) ADMITTED INSURER.—The term ‘‘admitted insurer’’ means,
with respect to a State, an insurer licensed to engage in the
business of insurance in such State.
(2) AFFILIATE.—The
term ‘‘affiliate’’ means, with respect to an insured, any entity
that controls, is controlled by, or is under common control with
the insured.
(3) AFFILIATED GROUP.—The term ‘‘affiliated
group’’ means any group of entities that are all affiliated.
(4) CONTROL.—An entity has ‘‘control’’ over another entity
if—
(A) the entity directly or indirectly or acting
through 1 or more other persons owns, controls, or has the power
to vote 25 percent or more of any class of voting securities of
the other entity; or
(B) the entity controls in any
manner the election of a majority of the directors or trustees
of the other entity.
(5) EXEMPT COMMERCIAL PURCHASER.—The
term ‘‘exempt commercial purchaser’’ means any person purchasing
commercial insurance that, at the time of placement, meets the
following requirements:
(A) The person employs or retains
a qualified risk manager to negotiate insurance coverage.
(B) The person has paid aggregate nationwide commercial
property and casualty insurance premiums in excess of $100,000
in the immediately preceding 12 months.
(C)(i) The person
meets at least 1 of the following criteria:
(I) The
person possesses a net worth in excess of $20,000,000, as such
amount is adjusted pursuant to clause (ii).
(II) The
person generates annual revenues in excess of $50,000,000, as
such amount is adjusted pursuant to clause (ii).
(III)
The person employs more than 500 full-time or full-time
equivalent employees per individual insured or is a member of an
affiliated group employing more than 1,000 employees in the
aggregate.
(IV) The person is a not-for-profit
organization or public entity generating annual budgeted
expenditures of at least $30,000,000, as such amount is adjusted
pursuant to clause (ii).
(V) The person is a municipality
with a population in excess of 50,000 persons.
(ii)
Effective on the fifth January 1 occurring after the date of the
enactment of this subtitle and each fifth January 1 occurring
thereafter, the amounts in subclauses (I), (II), and (IV) of
clause (i) shall be adjusted to reflect the percentage change
for such 5-year period in the Consumer Price Index for All Urban
Consumers published by the Bureau of Labor Statistics of the
Department of Labor.
(6) HOME STATE.—
(A) IN
GENERAL.—Except as provided in subparagraph
(B), the
term ‘‘home State’’ means, with respect to an insured—
(i) the State in which an insured maintains its principal place
of business or, in the case of an individual, the individual’s
principal residence; or
(ii) if 100 percent of the
insured risk is located out of the State referred to in clause
(i), the State to which the greatest percentage of the insured’s
taxable premium for that insurance contract is allocated.
(B) AFFILIATED GROUPS.—If more than 1 insured from an
affiliated group are named insureds on a single nonadmitted
insurance contract, the term ‘‘home State’’ means the home
State, as determined pursuant to subparagraph (A), of the member
of the affiliated group that has the largest percentage of
premium attributed to it under such insurance contract.
(7) INDEPENDENTLY PROCURED INSURANCE.—The term ‘‘independently
procured insurance’’ means insurance procured directly by an
insured from a nonadmitted insurer.
(8) NAIC.—The term
‘‘NAIC’’ means the National Association of Insurance
Commissioners or any successor entity.
(9) NONADMITTED
INSURANCE.—The term ‘‘nonadmitted insurance’’ means any property
and casualty insurance permitted to be placed directly or
through a surplus lines broker with a nonadmitted insurer
eligible to accept such insurance.
(10) NON-ADMITTED
INSURANCE MODEL ACT.—The term ‘‘Non-Admitted Insurance Model
Act’’ means the provisions of the Non-Admitted Insurance Model
Act, as adopted by the NAIC on August 3, 1994, and amended on
September 30, 1996, December 6, 1997, October 2, 1999, and June
8, 2002.
(11) NONADMITTED INSURER.—The term ‘‘nonadmitted
insurer’’—
(A) means, with respect to a State, an insurer
not licensed to engage in the business of insurance in such
State; but
(B) does not include a risk retention group,
as that term is defined in section 2(a)(4) of the Liability Risk
Retention Act of 1986 (15 U.S.C. 3901(a)(4)).
(12)
PREMIUM TAX.—The term ‘‘premium tax’’ means, with respect to
surplus lines or independently procured insurance coverage, any
tax, fee, assessment, or other charge imposed by a government
entity directly or indirectly based on any payment made as
consideration for an insurance contract for such insurance,
including premium deposits, assessments, registration fees, and
any other compensation given in consideration for a contract of
insurance.
(13) QUALIFIED RISK MANAGER.—The term
‘‘qualified risk manager’’ means, with respect to a policyholder
of commercial insurance, a person who meets all of the following
requirements:
(A) The person is an employee of, or
third-party consultant retained by, the commercial policyholder.
(B) The person provides skilled services in loss prevention,
loss reduction, or risk and insurance coverage analysis, and
purchase of insurance.
(C) The person—
(i)(I) has
a bachelor’s degree or higher from an accredited college or
university in risk management, business administration, finance,
economics, or any other field determined by a State insurance
commissioner or other State regulatory official or entity to
demonstrate minimum competence in risk management;
and
(II)(aa) has 3 years of experience in risk financing, claims
administration, loss prevention, risk and insurance analysis, or
purchasing commercial lines of insurance; or
(bb) has—
(AA) a designation as a Chartered Property and Casualty
Underwriter (in this subparagraph referred to as ‘‘CPCU’’)
issued by the American Institute for CPCU/Insurance Institute of
America;
(BB) a designation as an Associate in Risk
Management (ARM) issued by the American Institute for
CPCU/Insurance Institute of America;
(CC) a designation
as Certified Risk Manager (CRM) issued by the National Alliance
for Insurance Education & Research;
(DD) a designation as
a RIMS Fellow (RF) issued by the Global Risk Management
Institute; or
(EE) any other designation, certification,
or license determined by a State insurance commissioner or other
State insurance regulatory official or entity to demonstrate
minimum competency in
risk management;
(ii)(I) has at
least 7 years of experience in risk financing, claims
administration, loss prevention, risk and insurance coverage
analysis, or purchasing commercial lines of insurance; and
(II) has any 1 of the designations specified in subitems
(AA) through (EE) of clause (i)(II)(bb);
(iii) has at
least 10 years of experience in risk financing, claims
administration, loss prevention, risk and insurance coverage
analysis, or purchasing commercial lines of insurance; or
(iv) has a graduate degree from an accredited college or
university in risk management, business administration, finance,
economics, or any other field determined by a State insurance
commissioner or other State regulatory official or entity to
demonstrate minimum competence in risk management.
(14)
REINSURANCE.—The term ‘‘reinsurance’’ means the assumption by an
insurer of all or part of a risk undertaken originally by
another insurer.
(15) SURPLUS LINES BROKER.—The term
‘‘surplus lines broker’’ means an individual, firm, or
corporation which is licensed in a State to sell, solicit, or
negotiate insurance on properties, risks, or exposures located
or to be performed in a State with nonadmitted insurers.
(16) STATE.—The term ‘‘State’’ includes any State of the United
States, the District of Columbia, the Commonwealth of Puerto
Rico, Guam, the Northern Mariana Islands, the Virgin Islands,
and American Samoa.
PART II—REINSURANCE
SEC. 531. REGULATION OF
CREDIT FOR REINSURANCE AND REINSURANCE AGREEMENTS.
(a) CREDIT FOR REINSURANCE.—If the State of domicile of a
ceding insurer is an NAIC-accredited State, or has financial
solvency requirements substantially similar to the requirements
necessary for NAIC accreditation, and recognizes credit for
reinsurance for the insurer’s ceded risk, then no other State
may deny such credit for reinsurance.
(b) ADDITIONAL
PREEMPTION OF EXTRATERRITORIAL APPLICATION OF STATE LAW.
—In addition to the application of subsection (a), all laws,
regulations, provisions, or other actions of a State that is not
the domiciliary State of the ceding insurer, except those with
respect to taxes and assessments on insurance companies or
insurance income, are preempted to the extent that they—
(1) restrict or eliminate the rights of the ceding insurer or
the assuming insurer to resolve disputes pursuant to contractual
arbitration to the extent such contractual provision is not
inconsistent with the provisions of title 9, United States Code;
(2) require that a certain State’s law shall govern the
reinsurance contract, disputes arising from the reinsurance
contract, or requirements of the reinsurance contract;
(3) attempt to enforce a reinsurance contract on terms different
than those set forth in the reinsurance contract, to the extent
that the terms are not inconsistent with this part; or
(4) otherwise apply the laws of the State to reinsurance
agreements of ceding insurers not domiciled in that State.
SEC. 532. REGULATION OF REINSURER
SOLVENCY.
(a) DOMICILIARY STATE REGULATION.—If the
State of domicile of a reinsurer is an NAIC-accredited State or
has financial solvency requirements substantially similar to the
requirements necessary for NAIC accreditation, such State shall
be solely responsible for regulating the financial solvency of
the reinsurer.
(b) NONDOMICILIARY STATES.—
(1)
LIMITATION ON FINANCIAL INFORMATION REQUIREMENTS.—
If
the State of domicile of a reinsurer is an NAICaccredited State
or has financial solvency requirements substantially similar to
the requirements necessary for NAIC accreditation, no other
State may require the reinsurer to provide any additional
financial information other than the information the reinsurer
is required to file with its domiciliary State.
(2)
RECEIPT OF INFORMATION.—No provision of this section shall be
construed as preventing or prohibiting a State that is not the
State of domicile of a reinsurer from receiving a copy of any
financial statement filed with its domiciliary State.
SEC. 533. DEFINITIONS.
For
purposes of this part, the following definitions shall apply:
(1) CEDING INSURER.—The term ‘‘ceding insurer’’ means an
insurer that purchases reinsurance.
(2) DOMICILIARY
STATE.—The terms ‘‘State of domicile’’ and ‘‘domiciliary State’’
mean, with respect to an insurer or reinsurer, the State in
which the insurer or reinsurer is incorporated or entered
through, and licensed.
(3) NAIC.—The term ‘‘NAIC’’ means
the National Association of Insurance Commissioners or any
successor entity.
(4) REINSURANCE.—The term
‘‘reinsurance’’ means the assumption by an insurer of all or
part of a risk undertaken originally by another insurer.
(5) REINSURER.—
(A) IN GENERAL.—The term ‘‘reinsurer’’
means an insurer to the extent that the insurer—
(i) is
principally engaged in the business of reinsurance;
(ii)
does not conduct significant amounts of direct insurance as a
percentage of its net premiums; and
(iii) is not engaged
in an ongoing basis in the business of soliciting direct
insurance.
(B) DETERMINATION.—A determination of whether
an insurer is a reinsurer shall be made under the laws of the
State of domicile in accordance with this paragraph.
(6)
STATE.—The term ‘‘State’’ includes any State of the United
States, the District of Columbia, the Commonwealth of Puerto
Rico, Guam, the Northern Mariana Islands, the Virgin Islands,
and American Samoa.
PART III—RULE OF CONSTRUCTION
SEC. 541. RULE OF
CONSTRUCTION.
Nothing in this subtitle or the
amendments made by this subtitle shall be construed to modify,
impair, or supersede the application of the antitrust laws. Any
implied or actual conflict between this subtitle and any
amendments to this subtitle and the antitrust laws shall be
resolved in favor of the operation of the antitrust laws.
SEC. 542. SEVERABILITY.
If any section or subsection of this subtitle, or any
application of such provision to any person or circumstance, is
held to be unconstitutional, the remainder of this subtitle, and
the application of the provision to any other person or
circumstance, shall not be affected.
Dear member,
The Solvency ii Association develops and maintains a
compendium of Solvency ii related risk and compliance topics.
Subject matter experts review and update this body of knowledge.
The Solvency ii Association offers two Solvency ii
certification programs:
A. Certified Solvency ii Professional
(CSiiP) for professionals working in the EEA countries
B.
Certified Solvency ii Equivalence Professional (CSiiEP) for
professionals working in non-EEA countries
The Solvency ii
Association has signed an exclusive worldwide partner agreement with
Solvency II Training Ltd., so the Association will provide Solvency
II Training classes worldwide only in cooperation with Solvency II
Training Ltd.
As Corporate Affiliates of The Institute
of Continuing Professional Development (CPD) our three-day Solvency
II training courses offer delegates a total of 24 (CPD) hours.
Contact: Ross Fenwick, Managing Partner, Solvency II
Training
T: + 44 207 060 3312, F: + 44 207 681 3317
|
.gif){kind=small}
.gif){kind=small}
.gif){kind=small}