If the International Association of Insurance Supervisors (IAIS) does not make its own decision, given its insurance expertise, on which companies are global systemically important insurers, or G-SIIs, then the global Financial Stability Board (FSB) will decide for it, said Yoshi Kawai, secretary general of the IAIS.
"If we at the IAIS have consensus among ourselves, I assume the FSB will respect our decision. We have the expertise to demonstrate to the FSB, but if we don't, the FSB will take over," Kawai said.
Kawai was answering a question from Missouri Insurance Director John Huff, the NAIC's representative on the U.S. Treasury-led Financial Stability Oversight Council (FSOC) on the concern that some state regulators have on the relationship between the IAIS and the FSB.
Both spoke April 6 at the NAIC Spring National Meeting at an NAIC industry liaison meeting in Houston.
The policy measures and a study of impact issues will take place at the end of the year and into next year.
The three areas which G-SIIs will be subject to under the policy measures are:
- Enhanced supervision;
- Effective resolution; and
- Higher loss absorption (HLA) capacity.
G-SIIs can choose to reduce their systemically risky activities and exit their G-SII status if indeed there are any G-SIIs.
Kawai said in another meeting later in the day on international issues that although the Geneva Association's recent Cross-Industry Benchmarking report, a systemic risk indicator-based analysis, claims to show that the biggest, most interconnected insurers aren't as big or risky as even the middle-tiered global banks. The Association's data is based on publicly-based information, not confidential information that supervisors have but sometimes cannot share amongst themselves. Thus, he suggested, its results are flawed.
Geneva Association's Secretary General John Fitzpatrick responded by noting that where the insurers did not disclose the data item publicly, it obtained the data by signing confidentiality agreements with a number of insurers.
"The data was nonpublic precisely because it was immaterial to the company and therefore not required to be disclosed," Fitzpatrick said Sunday in its defense of the report, adding that the Association has support from experts that the study reflects 95 percent of the systemic risk insurers pose to the world.
"Saying that the study is flawed because it uses public information is to say that the fundamental foundation of the world's system of public disclosure is flawed," Fitzpatrick stated.
Some members of the FSB will do their own analysis in June using private information and share it to the extent possible due to the proprietary information, Kawai said. These members have privately criticized the Geneva report cross-industry analysis for the reasons Kawai described, believing they have access to more detailed, nonpublic information, according to an IAIS observer source.
The Geneva Association sought to quantify and compare the systemic risk of banks versus insurers using comparable criteria required by the IAIS data calls, it said.
Kawai is a member among the bank-supervisor heavy FSB, which operates under the G-20 to promote global financial stability.
It is not known if the IAIS will recommend any insurers for G-SIIs. Kawai's statement suggested there was not complete agreement among members.
One insurance executive privately lamented the fact that the same issues that may have made it a G-SII last year no longer apply this year, and the IAIS is asking for outdated information in its data calls.
Meanwhile, a new guidance memo on the IAIS ComFrame project allows for more time and discussion on some of its visions and is allowing for more time before the next draft as the industry pummeled the IAIS on confidentiality concerns.
The NAIC Model Holding Company Act has weakened confidentiality, said a representative from the National Association of Mutual Insurance Companies (NAMIC). NAMIC wants a signed agreement between the NAIC and those states for sharing of information, its representative said.
We need a "higher standard of confidentiality — a higher standard of protection," said Kelly Ireland of the American Council of Life Insurers (ACLI).
The next public consultation on the draft for ComFrame, or the Common Framework for the Supervision of Internationally Active Insurance Groups (IAIGs), is now expected to begin in the third quarter of this year, or by the end of September – pushed back from July to incorporate recent changes, according to an IAIS official.
"Where existing regulation and supervisory processes limit comparability, ComFrame is intended to foster commonality," the IAIS stated in a Q & A memo April 4.
