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Global Insurance Regulatory Issues: Implications for U.S. Policy and Regulation

Friday, November 13, 2015

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The far-reaching impacts of the global financial crisis of 2007-2008 triggered a robust debate about the proper structure and practices of financial regulation. Although the business of insurance was not at the heart of the crisis, the near-collapse of one major global insurer, American International Group, Inc. (AIG), led international policymakers to take a closer look at insurance regulation and coordination at the international level.

In the United States, the Dodd-Frank Act established a new federal role for insurance regulation for the Federal Reserve Board and created the Federal Insurance Office. The G-20 countries created and augmented international forums to coordinate their efforts on cross-border insurance matters.

A number of pressing matters now face policymakers. Global regulators are developing a global standard for insurance capital, and also standards for coordinating their supervision and regulation of large, globally active insurers. The European Union (EU) is set to implement a new, comprehensive insurance regulatory regime with significant implications for U.S.-based companies, and the United States and EU are working toward an agreement on insurance oversight that could involve real concessions on both sides.

This paper summarizes the key participants in global insurance regulatory debates and the main issues with which they are wrestling. It includes several initial observations and recommendations:

  1. Global coordination on insurance regulatory issues is a positive dynamic, but policyholder protection should remain the top priority of regulators.
  2. The “Team USA” approach to international insurance negotiations is a step forward but is not sustainable in the long run. Its structure should be changed to clarify who speaks for the United States on global insurance matters and how the different U.S. participants should achieve consensus views to represent to other countries.
  3. Resolving large, complex insurers that fail is very different from resolving large, complex banks. U.S. regulators should make it a priority to understand these differences and detail how they will approach the resolution of insurers.

This paper is laid out in three sections. The first section gives a background of some of the major world, U.S., and EU actors in global insurance negotiations and their main efforts since the financial crisis. The second section summarizes key issues these actors and other policymakers are trying to hash out and what they mean. Finally, the third section presents several recommendations from the Bipartisan Policy Center’s Insurance Task Force.

The paper precedes a final report, which will include recommendations to improve insurance regulatory reform at the global, national, and state levels, to be issued in 2016.


International Issues