International Association of Insurance Supervisors

International Association International Association of Insurance Supervisorsof Insurance Supervisors

Observer PanelRe- / Deregulation

Steve Butterworth Chile 2002

IAIS Observer PanelRe- / Deregulation

Chile 2002

• IAIS - Outlook on model schedules and best practise statement.

- Mutual recognition of domestic supervisory rules based on IAIS Standards, Principles & Guidelines.


Chile 2002

• In Particular - Why check compliance many times in different

jurisdictions.


Chile 2002

Reasons for Differing Regulations

• Different markets• Different economic goals


Chile 2002

History• Patchwork supervision• Legal barriers• Practical problems in assessing supervisory practices• No exchange of information

IAIS Observer PanelRe- / Deregulation - Chile 2002

WTO Model SchedulesMarket Access• Reinsurance - M.A.T. - Intermediaries

- No restrictions• Life & Non-Life Reinsurance

- No mandatory cessions- No right of first privileges- No discrimination re collateralization &

localization- Freedom of form & contract


WTO Model SchedulesCommercial Presence• Form of establishments• Equity shares• Compulsory lines• Monopolies• Private participation in pensions & funds

management


Chile 2002

WTO Model Schedules• Temporary entry of natural persons• National treatment


Chile 2002

WTO Best Practices in Insurance• Transparency• Solvency and prudential focus• Insurance monopolies• Independent regulatory authority


Statement by Financial Leaders Working Group• FLWG - Financial Institutions and Associations in

Europe, North America, Japan & Hong Kong

• Fully Supportive- Greater price competition- Product diversity and innovation- Investment options- Retirements security- Local infrastructure development


Chile 2002

IAIS Core Principles of Supervision

• Capable of observance in all jurisdictions where there are adequate resources.

• IAIS core principles contain no barriers to prevent foreign insurers operating on the same terms as domestic insurers.


Chile 2002

Reliance on Rating Agencies

• Rating agencies not regulated• Sometimes inconsistent• Commercially driven


Chile 2002

Disadvantages

• Instability of markets.• Insurers / reinsurers pulling out.• Overseas supervisors little interest in your

domestic market.


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Disadvantages

• Insurer fraud in developing countries is prevalent.

• Fraudsters migrate to those countries with little effective regulation.


Chile 2002

The Guernsey Situation

• All insurers with a physical presence (either directly or indirectly - through agents) need a licence.

• Insurance intermediaries can place only with ‘recognized’ insurers - no licence issued.


Chile 2002

The Guernsey Situation

• Experienced problems with fraudulent marine insurers which the ‘recognized’ insurer system eliminated.

• Model schedule proposed cross border supply without restrictions to market access for M.A.T. and insured intermediation.


Chile 2002

The Guernsey Situation• Foreign insurers are not barred from a physical

presence.

• With current state of market, overseas branches are closing down.

• Creates problems - especially long-term contracts.


Chile 2002

Conclusion

• There must be total mutual international recognition of prudential and market conduct supervisory standards.

• Impossible? - Will politics and economic considerations interfere?

International Association of Insurance Supervisors

Documents

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