DES MOINES, Iowa – Insurance companies, trade groups and regulators are gathering in Iowa to discuss the industry’s major issues.
As the three-day Global Insurance Symposium is set to get underway Wednesday in Des Moines, plans to regulate firms like banks and impose national or even international oversight are at the fore.
The gathering includes top insurance officials from Germany, India, Japan and the United States. It was organized by Iowa Insurance Commissioner Nick Gerhart, who oversees a division regulating more than 200 insurance companies based in Iowa. The financial services industry employs 4,200 workers in the state at companies that include ING Life Insurance, Metlife, Nationwide, Principal Financial Group and Prudential.
As insurance increasingly becomes a global business, one of the biggest concerns is an effort to set international standards for insurance regulation. Most other countries have a centralized government regulatory system, unlike the United States where the insurance industry is largely regulated on a state-by-state basis. Each state has a commissioner responsible for making sure companies retain sufficient capital to remain financially healthy and are appropriately serving consumers. Some U.S. and international regulators have advocated for regulations that closely resemble those imposed on banks.
“From our perspective, one-size-fits-all-bank-centric world doesn’t work in insurance,” Gerhart said. “Insurance is not banking, so that’s what we’re working on. That will be a theme repeated over the next day and half.”
The Great Recession of 2007-2009 brought new financial regulation for U.S. banks and some of it spilled over into the insurance industry, said Leigh Ann Pusey, the CEO of American Insurance Association, a trade group representing 300 property-casualty insurers.
Congress passed the Dodd-Frank Wall Street Reform and Consumer Protection Act in 2010, which forces banks to comply with strict regulations on reporting, cash reserves and investment guidelines. The law also set up a Federal Insurance Office in the U.S. Department of Treasury. It is seen as the first step toward federal government regulation of insurance, a worry for many in the industry who say states have safety regulated insurance for more than 140 years.
Critics say the fragmented nature of the state-based regulatory system makes it more expensive and difficult for companies that sell insurance nationally to comply with 50 different regulatory schemes. They also argue that as the industry gravitates toward a globalized insurance market an overall federal regulatory system makes more sense.
Pusey, who plans to participate Thursday in a panel discussion at the Des Moines symposium, said the Financial Stability Board, the international panel established by the G-20 working toward global financial standards, is bank-centred and moving too quickly.
“I think the industry globally, not only here in the United States, is sort of very worried about more bank-centric approach to views of capital,” she said. “There’s a pace here that is both unrealistic and dangerous leading to potentially unintended consequences.”
Strict bank-style requirements that insurance companies hold certain levels of restricted cash in reserve could reduce the ability of insurers to cover policy and claims obligations and might prompt some to cut back their business, reducing insurance available on the market, she said.
“I think consumers should be paying attention both to making sure they are still protected as they are today and that nothing undermines that system that the U.S. has designed,” Pusey said.
Iowa Gov. Terry Branstad, like many governors in states with a major insurance presence, is protective of the state-based regulatory system.
“What’s important is for the international people to know the tremendous benefit of the state-regulated insurance industry that we have in America compared to the disaster they have in Europe,” he said Monday.
Speakers are to include Mike McRaith, director of the Federal Insurance Office; Ben Nelson, the former Nebraska governor and U.S. senator who is now the CEO of the National Association of Insurance Commissioners; Naruki Mori, assistant commissioner for international affairs of the Japan Financial Services Agency; and T.S. Vijayan, chairman of Indian Insurance Regulatory and Development Authority.
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