The NAIC International Insurance Forum held May 14 – 15 in Washington, D.C. brought together distinguished panelists and speakers providing insight on several insurance topics of interest. A discussion of several of these follows.
On disaster risk management, there was a discussion on the soft reinsurance market and abundant reinsurance capital despite 2017 being a substantial loss year. Flood risk continues to be the number one U.S. common disaster and has become an extremely complicated issue. The commercial market includes private flood carriers and private access to flood insurance for consumers would be a great benefit.
Inga Beale, CEO of Lloyds, spoke about the digitalization implementation project at Lloyds. Beale discussed the difficulty in underwriting cyber insurance and detecting, evaluating, and pricing those risks. Additional cyber insurance challenges are the aggregation of risk and how cyber integrates into existing coverages for other lines.
Jonathan Dixon, Secretary General of the IAIS, defined the IAIS’ next chapter through the following key objectives going forward: (1) capacity of members to implement global standards, (2) processes and procedures, (3) response to emerging issues and (4) the role of sustainable insurance and inclusiveness. Dixon also discussed how the supervisory approach to new risks should be less regulation and more supervision.
Antony Phillipson, Her Majesty’s Trade Commissioner for North America, provided insight on Brexit. Progress has been made on an implementation period that will extend from March 2019 through December 2020 so that current terms of agreements and contracts will continue. Reciprocal regulatory processes have been proposed for financial services. Phillipson sees opportunities for a continued UK/U.S. cooperative business relationship including trade and financial regulatory working groups. Phillipson stated that the UK looks to replicate the EU/U.S. Covered Agreement post Brexit through engagement with the U.S. Federal and state authorities.
Four important initiatives were discussed during a panel on systemic risk regulation and macroprudential policy tools. The current macroprudential initiative focus is on (1) liquidity, (2) recovery and resolution, (3) counter party exposure and (4) capital and stress testing. There was dialogue on an activities-based approach versus an entity-based approach and the need to move away from size as an indicator of systemic risk. The point was made that regulators should have the ability to take a microprudential view as that is where strong regulation begins. Another point raised was that, when determining comparable outcomes among insurers, excessive uniformity must be avoided as that in itself promotes systemic risk.
As insurers and supervisors manage global and unique jurisdictional risks, industry participants will benefit from collaborative engagement on these and other topics to best manage these risks and educate consumers.
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