The Property Casualty Insurance Association of America (PCI) released a statement expressing concern over a recent charter released by the Financial Stability Board (FSB), which lays the groundwork for peer review of U.S. financial regulations. PCI claims that the system will result in insurance organizations being treated like banks.
According to PCI, under the charter, FSB member countries will undergo peer reviews, which will take place 2 to 3 years after a Financial Sector Assessment Program (FSAP) review. The peer reviews will focus on the implementation of recommendations made in the preceding FSAP report.
“PCI appreciates that the FSB notes the ‘good progress’ made by the U.S. in following up on the FSAP recommendations, and PCI agrees with the FSB on the need to ensure effective and efficient coordination, information sharing, and address any overlap or gaps in the roles and responsibilities of the agencies. However, an approach that is designed for banks should not be imposed on insurers, which have very different business models and risk profiles,” said David Snyder, PCI’s VP of international policy.
The FSB peer reviews would focus on four areas addressing FSAP recommendations, including: regulatory uniformity, enhanced insurance group supervision, modernization of solvency requirements and governance and funding reforms.
The FSB review also notes that “state authorities have taken useful steps to improve insurance group supervision; to modernize solvency requirements; and to improve disclosures required for securities lending operations by insurance companies.”
PCI’s Snyder agrees that the state-based system has reacted effectively and wishes it would continue to be given control.
“As we have consistently said, PCI and our members have worked with policy makers and regulators in cooperation to promote sound supervision and modernization efforts. And our state-based system is evolving to meet new challenges and incorporate new ideas,” Snyder said, adding “the FSB Peer Review Report was prepared by a global team that may not like our state-based system, not because it is ineffective, but because it is different.”
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