Team USA (collectively the National Association of Insurance Commissioners (NAIC), Federal Reserve Board (FRB), and the Federal Insurance Office (FIO) of the U.S. Treasury) achieved a major U.S. regulatory objective at the current 2019 Annual Meeting of the International Association of Insurance Supervisors (IAIS) regarding next steps and planned monitoring process for the Insurance Capital Standard (ICS) project.
The IAIS agreed to defining other alternative approaches to the ICS and developing a process to assess comparability. Team USA has collaboratively worked on an Aggregation Method as an alternative approach to group capital that is based on existing legal entity regulatory capital and requirements. The Aggregation Method builds on the proven state based system of regulation and consumer protection that is viewed by Team USA as more suited to the U.S. insurance marketplace. In addition, the IAIS committed to enhancing the five-year monitoring period (2020-2024) evaluation to consider further consultation on improvements to the ICS, leverage key findings and review results of an economic impact assessment.
State regulators’ strong concerns on the ICS include its effect on long-term insurance products due to a market valuation approach that creates unnecessary volatility in capital requirements. Despite the improved process to consider other approaches and monitoring period governance, Team USA affirmed their intent not to adopt the ICS, though to continue progress on a comparable approach to insurer capital that protects U.S. interests.
The U.S. viewpoint is stated very well by Massachusetts Insurance Commissioner Gary Anderson who serves on the IAIS Executive Committee (ExCo), “In coordination with the Federal Reserve and Treasury, we are committed to remaining actively engaged at the IAIS in the ICS project and all other work streams and are committed to advocate for, and only accept, those proposals that are in the best interest of U.S. consumers and insurers.”