20 January 2014

Risk.net: Group supervisors 'lack teeth' for regulating international insurance groups

Group supervisors, insurers and industry groups said, should have the ability to resolve disputes within a supervisory college, drive through decisions in the face of dissent and take sole responsibility for gathering group-wide data.

Philippe Brahin, head of governmental affairs and sustainability at Swiss Re in Zurich, says: "There should be a clear mandate given to the group supervisor to pursue certain objectives and conduct specific investigations. It should also have the ability to carry out reports and make decisions without having too many other supervisors involved and complicating the process. Trust is key in such a set-up. That will be a big improvement."

Hannah Grant, head of international affairs and reinsurance at Insurance Europe in Brussels, says: "As it stands, there is no incentive pushing supervisors to come to agreements. If the group supervisor were to be tasked with that role, hopefully it would make the decision-making process run smoother, because there is the threat the group supervisor would take action without consensus otherwise."

Other aspects of ComFrame's approach to group supervision are also controversial, opening up divisions between national regulators and also between regulators and firms. There was no consensus over whether some of the largest IAIGs should be assigned more than one group supervisor, or on the role of the supervisory college in the event that an insurer becomes distressed. The IAIS did not consult on supervisors' responsibilities in crisis and resolution scenarios as it was waiting for the Financial Stability Board (FSB) to set out the so-called ‘key attributes' – the core elements – of an effective resolution regime. These were initially intended to apply only to global systemically important financial institutions (G-SIFIs), but some national authorities – such as those of Singapore and Germany – say they will be implemented for IAIGs as well.

Not all have warmed to the idea of applying the FSB's key attributes to IAIGs. Stephen Zielezienski, senior vice-president at the American Insurance Association in Washington, DC, says a distinction needs to be drawn between the regulatory consideration of business continuity planning for IAIGs and the application of orderly liquidation authority and production of so-called ‘living wills'. The latter, he argues, are only appropriate as policy measures for designated G-SIFIs.

Others favour a hybrid approach, whereby crisis management groups should be assigned to IAIGs as outlined in the key attributes, but the supervisory college should also maintain a role.

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