Econintersect: The Financial Stability Board (FSB) has severely criticized the insurnace regulatory structure in the United States. The report by the FSB says that the U.S. insurance industry struggles under a system which is fragmented, improperly capitalized and subject to potential political influence. The U.S. insurance regulatory system is said to be in a state of major disrepair.
Overall the FSB report suggests the U.S. needs a more federal, streamlined system. Specific challenges from the FSB:
- Promote greater regulatory uniformity;
- Enhance insurance group supervision;
- Require consolidated financial reporting;
- Strengthen the FIO (Federal Insurance Office);
- Strengthen state insurance regulators; and
- Revise capital requirements.
An article at Life Health Pro has the following quotation from a U.S. Treasury Department spokesman:
“As a member of the FSB, we welcome the evaluation of our financial sector policies by an independent international body. We agree with the findings that the establishment of the Financial Stability Oversight Council, the Office of Financial Research and the Federal Insurance Office represent important steps to enhance the stability of the financial system.”
There have been other attempts to compare and improve global insurance regulatory systems. KMPG heads an Insurance Regulatory Services activity which last met October 2012 provides a forum for discussion of insurance regulatory issues including the top supervisors from the U.S. and EU. The result of the last meeting resulted in a 100 page report which was presented
“without offering a firm commitment to change, reflective of the highly sensitive environment that has come to dominate theEU/U.S. insurance supervisory relationship.”
Econintersect finds that the tone of the paper’s language inferred a deference to the U.S. insurance regulation as the superior regime compared to the EU system, if for no more important reason than its seniority.
The FSB report throws an extreme challenge in the face of the KMPG report.
Note: The Financial Stability Board should not be confused with another organization, the UK Financial Services Authority (FSA). From the FSB website:
The FSB has been established 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.
Sources:
- International group blasts U.S. insurer regs (Arthue D. Postal and Elizabeth D. Festa, Life Health Pro, 28 August 2013)
- Insurance Regulation – On the Move (EU-U.S. joint study paper, KMPG, November 2012)
