Trends and Developments
Summary
After the great success of last year's Conference on Transatlantic Insurance Group Supervision, we extended the geographical scope of this year's conference to create a more global perspective. The objective of the conference was to encourage the exchange between supervisors and leading professionals of the insurance industry on the subject of Global Insurance Supervision.
Through prominent contributions on "Colleges of Supervisors" and in-depth discussions on the topic of "Regulatory Convergence" in break-out sessions, the participants could either derive solutions or elicit where the main issues of international cooperation lie. Furthermore, a panel discussion with a special focus on "Systemic Relevance of Insurers" provided valuable opinions on the current worldwide discussion.
During the presentations, supervisors from different regulatory environments presented their standards for insurance group supervision. The opinions on group supervision differ: Whereas the EU, with its Solvency II approach, includes - amongst other qualitative elements - quantitative capital requirements on the group level, the U.S. applies a "windows & walls approach" focusing on approval of transactions and analyzing the financial conditions of the legal entities as part of the group. Switzerland, for example, pursues an integrated supervisory approach not only adopted for Swiss solo supervision, but also for group and conglomerate supervision. The industry representative suggested that insurance group supervision should be as lean as possible. It should not focus too closely on single aspects of group risks but rather on the overall picture of the group's risk profile.
Moreover, both supervisors and the industry agree that trust and common understanding are crucial for global insurance supervision and also the foundation for the proper functioning of the colleges. Our conference certainly contributed to furthering both.
The topic of "Regulatory Convergence" was addressed from four perspectives. The conference participants confirmed the advantages of having a global standards setting, and both supervisors and industry acknowledged the difficulties in addressing national divergences. In addition, a globalized supervisory system might increase the danger of systemic risk and market competition distortion. Under these circumstances, supervisors have to show leadership qualities in group supervision. The main outcome of the discussion was that the driving factor for successful global insurance supervision is enhanced trust and better communication between all parties.
On the second day of the conference, the panel discussants emphasized the importance of recognizing and managing the consequences of systemic risk from which insurance groups might suffer. Both supervisors and academics pointed out that what is needed first of all is better information and date to understand the risk of a wide variety of insurance products, being traditional or non-traditional, and business models, sharing of information on both local and global levels for identifying systemic risk, development of sound policy measures and improving these in practice.