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EY Regulatory Series: FIO questions Captives and principle-based reserving; IAIS G-SII designation, and more.


In this edition of the EY Global Insurance Regulatory Series, host Bob Stein welcomes EY Global Advisory Partner Rick Marx for a discussion on details of the FIO report and IAIS GSII designation.

According to Marx, the report from the Federal Insurance Office (FIO) on the future of U.S. regulation “did a “good job of analyzing issues that exist in the U.S.  State-based system.” And while many expected the FIO to make a case for Federal regulation, the report expressed support for the current system, and suggested Congress be involved to ensure “modernization.”


FIO expressed concern over captives and “principle-based reserving.  Its report noted that the State-based regulation is not meant to be a consolidated capital/solvency system, which has promoted the use of captives in the past.  In regard to principle-based reserving, Mr. Marx notes that it is complicated and requires expertise, staff and resource that the State regulators do not currently have.  Outsourcing of the requisite analysis creates additional sources of concern.

The discussion turns to Globally Systemic Important Insurers (G-SIIs) and the limited intent of the International Association of Insurance Supervisors (IAIS) in designating capital requirements for G-SIIs.  Marx says some of the proposed requirements for certain insurers may be appropriate, but the question remains:  “if (an insurer) gets put in the (G-SIIs ) designation that requires excess capital, is there any way to get out of that designation?”

Visit the WRIN.tv On Demand Libraryfor more in the EY Global Insurance Regularity Series.


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