WASHINGTON – The Property Casualty Insurers Association of America (PCI) today sponsored a policy briefing entitled “Does One Size Fit All? A Policy Discussion on Insurance, Regulation, and the American Economy” on Capitol Hill, where House Financial Services Committee members and industry experts discussed the potential effects of international standard setting on United States’ current state-based regulatory structure.
The event was part of PCI’s 2015 Capital Engagement Series. The panel included Financial Services Committee members Representatives French Hill (R-AR) and Steve Stivers (R-OH) and industry experts Mark Calabria, director of finance regulation studies, the Cato Institute, Adam Posen, president, Peterson Institute for International Economics, Christina Urias, managing director of international insurance regulatory affairs, National Association of Insurance Commissioners, and Terri Vaughan, dean of the College of Business and Public Administration, Drake University.
The forum highlighted mounting concerns about the increased power overseas regulators are wielding at closed-door forums to set international capital standards, with little to no opportunity for consumer input and accountability. Global, bank-centric standards are being demanded without a demonstration of need or consideration of consumer impact. “We should be wary of applying bank-like standards to insurance companies, given the repeated failures in bank regulation that contributed to the crisis in the first place,” says Calabria.
“Unfortunately, policymakers who do not understand the insurance industry, particularly those steeped in banking, are setting much of the direction,” according to Vaughan. “The risk of unintended consequences, potentially severe ones, is real.”
“Insurers certainly need regulation and supervision, including clear capitalization to meet their policyholders’ expected payouts,” says Posen. “But almost every jurisdiction, and certainly the U.S. states, already provides such pure protective supervision.”
“Everyone should care (about this issue) because it affects the affordability and availability of insurance products and that affects consumers on Main Street,” says Christina Urias, Managing Director of International Insurance Regulatory Affairs, National Association of Insurance Commissioners.
To address real concerns about the potential, devastating effects of the implementation of one-size-fits- all international regulatory standards, lawmakers on Capitol Hill are taking action. Legislation is currently moving in both Houses to improve collaboration among U.S. international representatives, requiring more robust public transparency as key decisions are being made about international capital standards for insurers.
“We applaud Congress for taking action on behalf of consumers to prevent the adoption of bank-centric holding company regulation that could undermine the proven and crisis-tested state-based regulatory structure,” says David A. Sampson, PCI’s president and CEO. “The U.S. insurance market is financially strong, highly competitive, and comprehensively regulated by the states for solvency and consumer protection. Though leaders on the left and the right are coming together to call for reasonable limits against harmful, one-size fits all regulation.”The Hill’s webcast of the forum can be viewed here. Vaughan and Calabria’s report and other resources can be found on PCI’s website.