The U.S. state-based insurance regulatory system has a strong track record of protecting consumers and solvency oversight, especially during the 2008 global financial crisis when the insurance sector remained relatively stable compared to other financial sectors. Comprehensive data collection and analysis, rigorous hands-on supervision, and transparency for consumers and investors are the hallmarks of the U.S. system.
The NAIC accreditation process has resulted in strong uniform national standards for solvency and other rules across the U.S. insurance regulatory system. Effective regulation is not a static process; our regulatory framework is monitored and updated continuously through the NAIC process. We constantly seek to refine our risk-based solvency system, and the NAICís Solvency Modernization Initiative (SMI) represented our most recent effort to maintain the highest standards of insurance regulation. Through the SMI, we have reviewed our existing system, while building on its strengths and incorporating best practices, including those from the international supervisory community and newly proposed insurance regulatory standards. We believe in the long-term objective of global regulatory convergence or alignment on an outcomes basis that protects consumers and promotes industry stability.
The U.S./EU Mutual Regulatory Understanding Project
In order to modernize its existing insurance solvency regulation, the European Union (EU) has been undertaking a fundamental review of the capital adequacy regime for the European insurance industry and developing the details of Solvency II with the goal of implementing a regime that is more risk-based in nature and adjusted to economic realities. U.S. insurance supervisors are supportive of the ongoing work of our transatlantic colleagues to implement Solvency II within Europe.
U.S. and EU insurance regulators have been engaging in regulatory dialogues over the last 10 years on issues of mutual regulatory concern and in January 2012 embarked on the EU-U.S. Mutual Regulatory Understanding Dialogue Project with the objective of further enhancing understanding and cooperation between the two systems for the benefit of insurance consumers, business opportunity and effective supervision. With the involvement of technical experts in both jurisdictions, the Project produced a factual Report on commonalities and differences between the jurisdictions in key areas of supervision. A detailed project plan was developed in early 2013 and will be updated periodically as certain common objectives and initiatives are pursued over the next five years.
The Dialogue participants are currently working on implementing various objectives outlined in a mutual way forward document. As part of the public dialogue, there was an open forum in 2013 during the NAIC Fall national meeting which focused on best practices in supervisory colleges featuring regulators and company officials from both sides of the Atlantic with significant amount of experience both hosting and attending supervisory colleges.