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18th of May 2012

Apprehension about Solvency II equivalence

Vicky Beckett 28/11/2011

The state-based regulatory system in the US should be deemed equivalent to Europe’s Solvency II regulatory process, the NAIC have stated.
 
Therese Vaughn, CEO of the National Association of Insurance Commissioners (NAIC) released a statement this month about the US’ progress towards the European directive.
 
Vaughn said while the US will not have a single set of rules like the European Union (EU), the state-based regulation works and has been tested by the recent financial crisis. 
 
Skip Myers, a member of the NRRA and partner at Morris, Manning and Martin, said the industry is very apprehensive about equivalence.
 
“The SMI is going to be more of a burden than the previous positions the NAIC have taken on RRGs.
 
“All insurance is affected by this, and compared to the rest of the industry captives can learn to live with it.
 
“If all these additional obligations are put on captives, it begs the question ‘why have a captive?’ However there are still not all the obligations of a commercial insurance company.”
 
Martin Le Pelley, compliance director of Heritage Insurance Management, said: “Europeans would want the US market involved. They are almost giving people equivalence now, no questions asked, so I don’t see that it would make any difference now.”
 
The NAIC's Solvency Modernization Initiative (SMI) is currently carrying out a self-examination of the US’ insurance solvency regulation framework. 
 
SMI will inform state insurance regulators on how insurers should disclose risks in light of international developments in insurance supervision, banking supervision, and international accounting standards.    
 
Under Solvency II, any foreign firms operating within the EU must be regulated by a ‘functional equivalent’ regulator in order to receive the same treatment as EU insurers. 
 
Therefore, without equivalence, US insurers doing business in the EU may face many difficulties.
 
The project is being guided by the SMI Roadmap, a document describing the policy direction and priorities agreed upon for the project.
 

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Lynell 17/01/2012 2:28am

TYVM you've solved all my prolbems

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