International Standard Setting

Last Updated 5/02/2018

Issue: International organizations, including the Financial Stability Board (FSB) and the International Association of Insurance Supervisors (IAIS), are working to develop global standards. In some cases, the global standards may be ineffective or inconsistent with current U.S. policy, the U.S. state-based system of insurance regulation, and the best interests of U.S. consumers and U.S. insurance industry.

The NAIC has a long history of engagement with our international regulatory counterparts. The NAIC is a founding member of the IAIS and initially served as its secretariat. The IAIS represents insurance regulators and supervisors of more than 200 jurisdictions constituting 97% of the world's insurance premiums. It is the principal international organization of insurance supervisors, engaged in creating international standards and guidelines on insurance supervision, and implementing the standards in the member jurisdictions. The IAIS has no regulatory power or legal authority, but it influences national and regional regulators by publishing supervisory material, offering training and support, and advancing the latest developments in international regulation.

Congress recognizes state insurance regulators oversee 100% of the U.S. private insurance market and are engaged in international leadership roles as group-wide supervisors who coordinate the oversight of large complex U.S. insurance groups operating across many jurisdictional borders. U.S. membership of the IAIS includes the NAIC and its 56 members, as well as the FIO and the Federal Reserve, who have their own objectives, more narrow authorities and more limited insurance experience. The FIO and the Federal Reserve are also members of the FSB, which excludes state insurance regulators and the NAIC.

In October 2011, the IAIS adopted 26 revised Insurance Core Principles (ICPs), creating an updated set of expectations for insurance supervisory systems. The ICPs provide a globally accepted framework for the regulation and supervision of the insurance sector—they apply to insurance supervision in all jurisdictions regardless of the level of development. They are also utilized within the Financial Sector Assessment Program (FSAP) by the World Bank and the International Monetary Fund (IMF).  Certain ICPs were recently updated in November 2017.

Status: State insurance regulators, legislators, policyholders and insurers have all called for greater transparency in the discussions and decisions of the FSB and the IAIS, as well as more accountability in the activities of the Treasury Department and the Federal Reserve Board on international insurance matters.

Congress has an important role to play in overseeing U.S. policy on international efforts to develop global standards for regulating the insurance sector, and, in particular, the roles and objectives of the Treasury Department and the Federal Reserve, because both are deeply engaged in the discussions and decisions of the FSB and the IAIS. Although international standards are non-binding, they nevertheless could be implemented in many jurisdictions and ultimately impact the competitiveness of the U.S. insurance sector.

The IAIS is working on its Common Framework for the Supervision of International Active Insurance Groups (ComFrame), which builds on individual member efforts to improve group supervision and provide better insights to supervisors on how internationally active insurance groups (IAIGs) operate and the risks they face. U.S. state insurance regulators and the NAIC are active in the development of ComFrame.  Annual field testing of ComFrame began in 2013 and is designed to help evaluate in practice ComFrame requirements and design options so that it can be modified as necessary prior to formal adoption. The IAIS is also currently developing a risk-based global insurance capital standard (ICS). A final Version 2.0 of the ICS is scheduled to be adopted, along with rest of ComFrame, following the completion of field testing in 2019.

The NAIC believes it is important international standards, such as those for global group capital, not discourage long-term investment and insurance product breadth. Additionally, the NAIC believes there should be mutual recognition of each other's regulatory frameworks. The NAIC also advocates for federal objectives to better align with the state-based regulatory system, which provides policyholder protections and maintains stable and competitive insurance markets.