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International Regulators Debate Global Capital Standard in Iowa

Insurance regulators from around the world attended the Global Insurance Symposium in Des Moines, Iowa, last week...
June 2, 2014

Insurance regulators from around the world attended the Global Insurance Symposium in Des Moines, Iowa, last week. Among the issues discussed was a global regulatory standard that would create one system for determining how much capital insurance companies would need in reserve. The capital requirement, opponents to the standard argue, would put an undue burden on insurance companies in the U.S.

National Association of Insurance Commissioners (NAIC) CEO Senator Ben Nelson said, “The additional costs of capital will not be borne by shareholders and bondholders, but by policyholders.” Nelson and other speakers said a singular system could decrease competition in the insurance market and reduce the amount of money insurance companies would have available for new products and lower-priced premiums. “This is a banking system of regulation that some would like to impose over our system of regulation, which is insurance regulation. They’re not the same,” he said.

Multiple symposium speakers alluded to how well the insurance sector fared during the financial crisis compared with other industries as another reason a global standard is not necessary. One of the speakers, lawyer Charlie Richardson, paraphrased a Warren Buffett quote:

“Warren Buffett famously remarked, ‘When the economic tides go out, you see who is swimming naked,’” Richardson said. “When the economic tides went out in 2008 and 2009, much of the insurance sector was clothed in Midwest-modest, neck-ankle swimsuits, giving the unidigital salute to the bucknaked banks, investment banks, auto sector and so many others that were dropping like flies.”