International Standard Setting

Last Updated 7/12/2018

Issue: International organizations, including the Financial Stability Board (FSB) and the International Association of Insurance Supervisors (IAIS), are working to develop global standards. In some cases, the global standards may be ineffective or inconsistent with current U.S. policy, the U.S. state-based system of insurance regulation, and the best interests of U.S. consumers and U.S. insurance industry.

The NAIC has a long history of engagement with our international regulatory counterparts. The NAIC is a founding member of the IAIS and initially served as its secretariat. The IAIS represents insurance regulators and supervisors of more than 200 jurisdictions constituting 97% of the world's insurance premiums. It is the principal international organization of insurance supervisors, engaged in creating international standards and guidelines on insurance supervision, and implementing the standards in the member jurisdictions. The IAIS has no regulatory power or legal authority, but it influences national and regional regulators by publishing supervisory material, offering training and support, and advancing the latest developments in international regulation.

Congress recognizes state insurance regulators oversee 100% of the U.S. private insurance market and are engaged in international leadership roles as group-wide supervisors who coordinate the oversight of large complex U.S. insurance groups operating across many jurisdictional borders. U.S. membership of the IAIS includes the NAIC and its 56 members, as well as the FIO and the Federal Reserve, who have their own objectives, more narrow authorities and more limited insurance experience. The FIO and the Federal Reserve are also members of the FSB, which excludes state insurance regulators and the NAIC.

In October 2011, the IAIS adopted 26 revised Insurance Core Principles (ICPs), creating an updated set of expectations for insurance supervisory systems. The ICPs provide a globally accepted framework for the regulation and supervision of the insurance sector—they apply to insurance supervision in all jurisdictions regardless of the level of development. They are also utilized within the Financial Sector Assessment Program (FSAP) by the World Bank and the International Monetary Fund (IMF).  Certain ICPs were recently updated in November 2017.

Status: State insurance regulators, legislators, policyholders and insurers have all called for greater transparency in the discussions and decisions of the FSB and the IAIS, as well as more accountability in the activities of the Treasury Department and the Federal Reserve Board on international insurance matters.

Congress has an important role to play in overseeing U.S. policy on international efforts, particularly for the roles of the Treasury Department and the Federal Reserve as they deeply engaged in FSB and IAIS discussions. International standards are non-binding, but their potential state implementation could impact the competitiveness of the U.S. insurance sector. Recently, a law was enacted to require the Treasury Department and the Federal Reserve provide Congress with an annual report on international insurance standard setting matters and efforts to improve IAIS transparency.

The IAIS is working on its Common Framework for the Supervision of International Active Insurance Groups (ComFrame). ComFrame aims to improve group supervision and provide better insights to supervisors on how internationally active insurance groups (IAIGs) operate and the risks they face. U.S. state insurance regulators and the NAIC are active in the development of ComFrame.  The IAIS is also currently developing a risk-based global insurance capital standard (ICS) as part of ComFrame. The IAIS has been conducting annual field testing of ComFrame and the ICS to help evaluate needed modifications prior to formal adoption at the end of 2019 and implementation beginning in 2020. A version 2.0 of the ICS is scheduled to be finalized in 2019 and will move into a five-year monitoring period starting in 2020. Under the recently enacted law, Treasury and the Federal Reserve are required to complete a study regarding the ICS before they can support or consent to its adoption.

The IAIS has also been reviewing various ICPs on a thematic basis based on recommendations from a self-assessment and peer review process as well as other developments. Updated versions of certain ICPs were adopted in 2015 and 2017; additional updated ICPs and changes based on an overall review of the ICPs to ensure consistency with ComFrame are scheduled for adoption in 2019.

Additionally, the IAIS has been working on a holistic framework for systemic risk assessment. This includes the development of an activities-based approach. The IAIS issued a consultation document at the end of 2017 and has been working to further refine this approach. It is also considering implications for the entities-based approach and potential policy measures. The IAIS plans to issue another consultation document towards the end of 2018 in order to finalize this framework in 2019.

The NAIC believes it is important international standards, such as those for global group capital, not discourage long-term investment and insurance product breadth. Additionally, the NAIC believes there should be mutual recognition of each other's regulatory frameworks. The NAIC also advocates for federal objectives to better align with the state-based regulatory system, which provides policyholder protections and maintains stable and competitive insurance markets.