Help

BI’s Article search uses Boolean search capabilities. If you are not familiar with these principles, here are some quick tips.

To search specifically for more than one word, put the search term in quotation marks. For example, “workers compensation”. This will limit your search to that combination of words.

To search for a combination of terms, use quotations and the & symbol. For example, “hurricane” & “loss”.

Login Register Subscribe

Captive rules becoming global: CICA

Reprints

ORLANDO, Fla.—Insurance regulatory reform efforts around the world ultimately will affect captive insurance companies regardless of domicile, a panel of speakers told attendees at the Captive Insurance Cos. Assn.'s annual conference.

While the Solvency II regulatory regime in development is a European Union initiative, elements will have an impact worldwide, some speakers suggested. Meanwhile, U.S. regulators have shown clear signs of embracing a more global approach to regulation, another panelist said.

“I believe Solvency II will have a huge impact, not only on European insurance companies but on insurers worldwide,” said Guenter Droese, managing director and global head of group insurance at Deutsche Bank A.G. in Frankfurt.

Solvency II is based on three regulatory “pillars”—the first, quantitative requirements taking a fair-value approach to the balance sheet; the second, qualitative requirements aimed at internal controls and risk management and the supervisory review process; and the third, required reporting.

Pillar 3 is “an area where as a captive we have some problems, because we want to run our business without too many noses in the way,” Mr. Droese said. He suggested that only competitors would be interested in reading about subjects such as captive claims that would be included under the new disclosure requirements.

Mr. Droese said he expects the additional requirements under Solvency II's first pillar to generate additional actuarial costs. For captives, “We have to make sure that our efforts, our workflows don't increase dramatically,” he said. Captive parents also must avoid incurring excessive costs, he said.

Solvency II also could affect captives involved in fronting arrangements, said Mr. Droese, driving up the costs of unrated captives involved in fronted programs that are reinsured with the captive.

“This will have a huge effect on each and every captive,” Mr. Droese said. “The whole captive community will be affected by that.”

Solvency II is to take effect Oct. 1, 2012, with full compliance requested by Dec. 31, 2013, but Mr. Droese said it's possible the effective date might change due to industry concerns.

Meanwhile, Tim Byrne, managing director at Willis Management (Dublin) Ltd., said there may be other changes to the proposed regulatory regime as captive owners and others in the industry voice their concerns. “At the moment, Solvency II is very much a moving target,” he said, while warning captive owners to “be aware of what the potential implications might be.”

Mr. Byrne suggested that captive owners ask their captive managers and regulators about their positions regarding Solvency II.

In the United States, Damian Sepanik, chief compliance officer at Zurich North America in Schaumburg, Ill., said various forces are leading those involved in the state-based insurance regulatory system to look at reforms that might result in a more global approach to regulation.

With regard to the National Assn. of Insurance Commissioners, Mr. Sepanik said, “I think there is more traction now to make lasting, broad changes to the regulatory scheme than I've ever seen.”

“There have been increased pressures by the federal government to get involved in insurance,” he said. “You couple that with the economic issues that we're all facing now.”

“We are in fact global, whether we want to admit it or not,” Mr. Sepanik said, adding that the NAIC is getting more involved in the International Assn. of Insurance Supervisors. These days, it's hard to find an IAIS committee that doesn't include an NAIC member regulator, he said.

It's essential that CICA members and others involved in captive insurance make sure the industry's concerns are represented, panelists said.

“I think what tends to happen in these forums, unless the captive industry is there at the table, the captive industry is forgotten,” said Mr. Sepanik.