Ray Spudeck on behalf of Director Ann Frohman

1
Group Supervision and Systemic Risk for US
Insurance Regulation

• Ray Spudeck on behalf of Director Ann Frohman
• December 03, 2009

2
US Supervision

• GLB The role of the Functional Regulator
• Functional Regulation vs. the Integrated
  Supervisor Model brings a different set of tools
  and needs
• Lessons learned from the recent financial turmoil
• Regulatory Reform is in the air, but will still
  require coordinated functional regulation and
  supervision

3
US Insurance Regulation

• Our system has worked very well by and large
• Focus on the legal entity with analysis of group
  structures and relationships solo plus in the
  current vernacular
• Want to ensure that our system remains on point
  in the world of more complicated and
  interconnected domestic and global markets
• Created the Group Solvency Issues (EX) Working
  Group under the Solvency Modernization Initiative
  Task Force

4
Why the Impetus on Group Supervision

• Better supervision across sectors for US based
  conglomerates to contribute to sound insurance
  markets, improved management of group-wide risk
  and enhanced policyholder protection
• Recognition and equivalence assessment frameworks
  that are in development
• We have a lot of insurance groups, of highly
  divergent size and complexity

5
Some Numbers for US Domestic Insurers

• About 22 billion in life and annuity direct
  premium is written outside of the US (4)
• About 9.7 billion in P/C direct premium is
  written outside of the US (3)
• About 20.5 of total US direct premium is written
  by insurers with some element (10 or more) of
  non-US control

6
GSI Considerations

• Where do we need to adapt to continue to provide
  strong solvency oversight in the world of
  changing and complex insurance group structures?
• How should that adaptation be implemented?
• How can we continue to effectively coordinate and
  communicate with other regulators and supervisors
  across sectors and jurisdictions?

7
GSI Projects

• Use of supervisory colleges and MoUs
  communication and coordination is critical across
  jurisdictions and within our system of functional
  regulation
• Enhancements to the Insurance Holding Company
  System Regulatory Act and Model Regulation
• Draft memo on suggested enhancements for group
  supervision to be exposed at the GSI meeting here

8
Systemic Considerations Flowing From GSI Work

• How do we prevent a future AIG-like event?
• What groups really are systemically risky,
  nationally or internationally? (Note latest FSB
  list includes no US insurers)
• What are the realistic options when a significant
  component of a group or conglomerate does become
  insolvent?
• Are the considerations for systemically important
  groups different from those not deemed
  systemically important?

9
The Work Continues

• Thank You