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FIO, Fed Defend Their Work on International Standards

During a hearing before the U.S. House Subcommittee on Housing and Insurance on November 18, Federal Insurance Office Director Michael McRaith and Federal Reserve Board Senior Advisor on Insurance Tom Sullivan defended their work with the International Association of Insurance Supervisors in developing global capital standards...
November 26, 2014

During a hearing before the U.S. House Subcommittee on Housing and Insurance on November 18, Federal Insurance Office (FIO) Director Michael McRaith and Federal Reserve Board Senior Advisor on Insurance Tom Sullivan defended their work with the International Association of Insurance Supervisors (IAIS) in developing global capital standards.

At the same time, lawmakers on the committee and the National Association of Insurance Commissioners (NAIC) expressed skepticism about the need for such a standard.

"In requiring companies to hold higher levels of capital, you severely limit the free flow of that capital, making it harder to create new jobs and products, and you could see the same kinds of price swings we have seen in other countries," said Pennsylvania Insurance Commissioner and NAIC President-elect Michael Consedine. "When you limit the availability of products that are based on long-term valuation, that can have a long-term detrimental effect on the economy." He said the standards could ultimately create more problems than they are intended to solve.

Consedine said the NAIC will remain engaged in the standard-setting process at the IAIS "to determine whether the concepts under discussion...make sense and add real benefit for U.S. policyholders." He added, "It is unclear what benefit these standards will bring to U.S. policyholders." Actions by the IAIS and the G20's Financial Stability Board (FSB) are not binding at either the state or federal level in the United States.

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