31 July 2012

Risk.net: Concerns over reporting burden on groups of proposed framework for international supervision

Proposals for a common framework for the supervision of international insurance groups could increase the reporting burden on groups and risk confidential information being inadvertently released.

The framework being developed by the International Association of Insurance Supervisors (IAIS) contains qualitative and quantitative requirements for international insurance groups, as well as proposals to foster greater cooperation and coordination among supervisors. It aims to provide a more integrated and multilateral framework for group-wide supervision

Some insurers are worried that confidential information provided to colleges of supervisors – the groups of supervisors that collaborate to supervise international groups – could inadvertently be disclosed, says Steve Lowe, a managing director at Towers Watson, based in Hartford, Connecticut.

A further concern for insurers is that framework could place additional reporting requirements on groups that may duplicate or even conflict with existing national rules. For instance, groups may need to report capital at entity level to local supervisors and then at group level under the common framework.

"Capital requirements are just one example of potential circumstances for duplication, or even conflicting requirements. That is where additional work needs to be done. There is much in the draft that is good and constructive and a good place to start but there is substantially more work to be done", says Lowe.

The IAIS has sought to allay concerns about breaches of confidentiality with the introduction of a memorandum of understanding (MoU) designed to ensure that insurers' information can be exchanged between supervisors in confidence. The IAIS says that 26 countries have already signed up to the MoU, accounting for 40 per cent of worldwide premiums alone.

The IAIS says that some countries may have to change their regulations to meet ComFrame's requirements. "I wouldn't rule out the need to change and I know that some countries are currently working through issues of sharing data", says Yoshihiro Kawai, secretary general of the IAIS, based in Basel.

The issue of duplication is also being addressed by the IAIS, says Kawai. "One of the things that we are trying to do is reduce the complexity of group supervision and make sure that you don't get multiple supervisors requesting similar information. We are trying to reduce those duplicative efforts among supervisors", he says.

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