International Association of Insurance Supervisors

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International Association of Insurance Supervisors

• Observer Panel
• Re- / Deregulation
• Steve Butterworth
  Chile 2002

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IAIS Observer PanelRe- / DeregulationChile 2002

• IAIS - Outlook on model schedules
• and best practise statement.
• - Mutual recognition of domestic
• supervisory rules based on IAIS
• Standards, Principles Guidelines.

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IAIS Observer PanelRe- / DeregulationChile 2002

• In Particular - Why check compliance many
  times in different jurisdictions.

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IAIS Observer PanelRe- / DeregulationChile 2002

• Reasons for Differing Regulations
• Different markets
• Different economic goals

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IAIS Observer PanelRe- / DeregulationChile 2002

• History
• Patchwork supervision
• Legal barriers
• Practical problems in assessing supervisory
  practices
• No exchange of information

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IAIS Observer PanelRe- / Deregulation - Chile
2002

• WTO Model Schedules
• Market Access
• Reinsurance - M.A.T. - Intermediaries
• - No restrictions
• Life Non-Life Reinsurance
• - No mandatory cessions
• - No right of first privileges
• - No discrimination re collateralization
  localization
• - Freedom of form contract

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IAIS Observer PanelRe- / Deregulation - Chile
2002

• WTO Model Schedules
• Commercial Presence
• Form of establishments
• Equity shares
• Compulsory lines
• Monopolies
• Private participation in pensions funds
  management

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IAIS Observer PanelRe- / DeregulationChile 2002

• WTO Model Schedules
• Temporary entry of natural persons
• National treatment

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IAIS Observer PanelRe- / DeregulationChile 2002

• WTO Best Practices in Insurance
• Transparency
• Solvency and prudential focus
• Insurance monopolies
• Independent regulatory authority

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IAIS Observer PanelRe- / Deregulation - Chile
2002

• Statement by Financial Leaders Working Group
• FLWG - Financial Institutions and Associations
  in Europe, North America, Japan Hong Kong
• Fully Supportive
• - Greater price competition
• - Product diversity and innovation
• - Investment options
• - Retirements security
• - Local infrastructure development

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IAIS Observer PanelRe- / DeregulationChile 2002

• IAIS Core Principles of Supervision
• Capable of observance in all jurisdictions where
  there are adequate resources.
• IAIS core principles contain no barriers to
  prevent foreign insurers operating on the same
  terms as domestic insurers.

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IAIS Observer PanelRe- / DeregulationChile 2002

• Reliance on Rating Agencies
• Rating agencies not regulated
• Sometimes inconsistent
• Commercially driven

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IAIS Observer PanelRe- / DeregulationChile 2002

• Disadvantages
• Instability of markets.
• Insurers / reinsurers pulling out.
• Overseas supervisors little interest in your
  domestic market.

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IAIS Observer PanelRe- / DeregulationChile 2002

• Disadvantages
• Insurer fraud in developing countries is
  prevalent.
• Fraudsters migrate to those countries with little
  effective regulation.

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IAIS Observer PanelRe- / DeregulationChile 2002

• The Guernsey Situation
• All insurers with a physical presence (either
  directly or indirectly - through agents) need a
  licence.
• Insurance intermediaries can place only with
  recognized insurers - no licence issued.

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IAIS Observer PanelRe- / DeregulationChile 2002

• The Guernsey Situation
• Experienced problems with fraudulent marine
  insurers which the recognized insurer system
  eliminated.
• Model schedule proposed cross border supply
  without restrictions to market access for M.A.T.
  and insured intermediation.

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IAIS Observer PanelRe- / DeregulationChile 2002

• The Guernsey Situation
• Foreign insurers are not barred from a physical
  presence.
• With current state of market, overseas branches
  are closing down.
• Creates problems - especially long-term contracts.

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IAIS Observer PanelRe- / DeregulationChile 2002

• Conclusion
• There must be total mutual international
  recognition of prudential and market conduct
  supervisory standards.
• Impossible? - Will politics and economic
  considerations interfere?