Momentum accelerating to adopt new solvency rules
New York, 20 June 2008 – With the National Association of Insurance Commissioners’ (NAIC) latest move to assess international solvency regulations and make adaptations to the US regulatory structure, Ernst & Young sees increased momentum for global alignment with solvency rules and endorses the Solvency Modernization Work Plan, which NAIC adopted this month.
“We applaud the work of the NAIC on this initiative,” said Philipp Keller, Head of the Ernst & Young Global Solvency II Task Force. “NAIC’s goal to upgrade the current framework is entirely in line with the organization’s historical commitment to be at the forefront of regulation and supervision.”
The NAIC plan will compare the US risk-based solvency system with Europe’s proposed solvency directives, known as Solvency II, and analyze the effect that Solvency II might have on US insurers, particularly with regard to capital requirements, accounting standards, group supervision, valuation issues, and reinsurance. The overhaul of Europe’s solvency framework is scheduled for implementation across the continent beginning in 2012.
“Introduced in the early 1990s, the US risk-based framework was state of the art,” said Keller. “Modernizing US regulations should lead to a more level playing field between US and European insurers and to a convergence of regulatory requirements. This may also reduce opportunities for regulatory arbitrage and create a more transparent and competitive financial market.”
The adaptation of the US insurance solvency system should benefit both the world’s largest insurance market and the global industry. “An economic- and risk-based regulatory framework in the US might well create efficiency gains not only for US insurers, but also for the many foreign insurance groups that have business in the US,” said Matthew Clark, a member of the Ernst & Young Global Solvency II Task Force.
Ernst & Young maintains a Solvency II website that provides information on the proposed regulations and commentary on the potential impact of this new framework. For more information, visit www.ey.com/solvencyII.
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