NAIC Capital Position Statements
Remarks at the Brookings Institution: Global Capital Standards: Implications for the U.S.
Michael F. Consedine
Testimony of the Honorable E. Benjamin Nelson Chief Executive Officer of the National Association of Insurance Commissioners Regarding: The Impact of International Regulatory Standards on the Competitiveness of U.S. Insurers
June 13, 2013
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Last Updated 7/31/17
In response to the 2008 global financial crisis, the Group of Twenty (G-20) Finance Ministers and Central Bank Governors created the Financial Stability Board (FSB) in 2009 as a successor to the Financial Stability Forum (FSF). The FSF, founded in 1999 by the G-7 finance ministers and central bank governors, was re-established as the Financial Stability Board with an expanded membership and broader mandate to address vulnerabilities affecting the global financial system, and to develop and promote the implementation of effective supervisory and regulatory policies promoting financial stability.
Overview: The FSB was created expressly to coordinate at the international level the work of national financial authorities and international standard setting bodies and to develop and promote the implementation of effective regulatory, supervisory and other financial sector policies in the interest of financial stability. The FSB brings together national authorities responsible for financial stability in 24 countries and jurisdictions, including all G-20 economies, the European Union, international financial institutions, sector-specific standard-setting bodies, and committees of central bank experts.
The FSB is chaired by Mark Carney, Governor of the Bank of England. Its Secretariat is located in Basel, Switzerland, and hosted by the Bank for International Settlements. The FSB consists of a Plenary, a Steering Committee, and other committees and sub-groups as needed. The Plenary is the decision-making organ of the FSB. The Steering Committee provides operational guidance between plenary meetings to carry forward the directions of the FSB. The Steering Committee is primarily made up of central bankers and national banking/financial services regulators. The U.S. is represented on the Steering Committee by the Federal Reserve Board (FRB), the U.S. Department of Treasury, and the Securities and Exchange Commission (SEC).
Since the financial crisis, the FSB has advanced a major program of financial regulatory reforms to address perceived shortcomings in the financial system exposed by the crisis while striving to create globally-consistent rules and a level playing field across countries and sector. The FSB has been tasked with providing recommendations and exploring how to treat global systemically important financial institutions (G-SIFIs) so as to prevent another financial crisis.
The FSB defines G-SIFIs as "institutions whose distress or disorderly failure, because of their size, complexity and systemic interconnectedness, would cause significant disruption to the wider financial system and economic activity." A global systemically important bank, or G-SIB, is one class of G-SIFI. Other classes of G-SIFI are global systemically important insurers (G-SIIs) and systemically important non-bank non-insurer (NBNI) financial entities. At the direction of the FSB, the IAIS published a methodology for G-SIIs, and a set of policy measures that will apply to them.
In July 2013, the FSB announced a list of nine multinational insurance groups it considers to be G-SIIs, including three based in the U.S. Since then, the FSB has published a G-SII list each year. The 2016 list is again composed of nine insurers, although they are not all the same insurers as the first two years, and includes the same three U.S.-based insurers. In addition, the FSB has established a regular program of country and thematic peer reviews of its member jurisdictions. FSB jurisdictions undergo an FSAP (Financial Sector Assessment Program) administered by the International Monetary Fund every five years with FSB peer reviews taking place 2-3 years following a FSAP review. The U.S. most recently underwent an FSAP in 2015. In August 2013, the FSB released its peer review report of the United States that confirms that the U.S. insurance regulatory system is effective at providing policyholder protection and ensuring the solvency of individual insurance companies.
Status: The U.S. insurance sector provides input to the FSB through the IAIS and through regular dialogues with U.S. federal agency staff supporting the U.S. FSB delegation. NAIC and state insurance regulators are active members of the IAIS Financial Stability and Technical Committee, including serving as chair, which provides direct input to the FSB, and is developing, at the direction of the FSB, a risk-based global insurance capital standard (ICS) for internationally active insurance groups.