International perspectives on solvency modernisation: United States of America


The United States of America

New development

The National Association of Insurance Commissioners (NAIC) Solvency Modernisation Initiative (SMI)

Background information

Unlike most countries which have a national insurance regulator, re/insurance companies in the US are supervised by regulators in each of the 50 US states and additional jurisdictions where they do business. The NAIC, a voluntary association of these regulators, is the primary vehicle for interstate coordination of re/insurance regulation. In 1994, the US introduced its Risk-Based Capital (RBC) system, a mainly factor-based approach that considers an insurers' size and risk profiles when determining capital requirements.

What's changing

The SMI is the NAIC's initiative to update the US solvency regulation framework. It includes a review of international developments regarding insurance supervision, solvency assessment, and international accounting standards and its potential application to US insurance regulation.

The impact

The SMI will strengthen significantly US measures for supervision of re/insurance groups. It will introduce requirements for enterprise risk management and prospective solvency assessment, taking account of related international action and insurance core principles adopted by the International Association of Insurance Supervisors (IAIS). SMI's reinsurance reforms will allow for ratings-based collateral for "certified" reinsurers. And SMI includes important initiatives to introduce principles-based reserving in life insurance and to refine the current RBC system; however, neither of these last two initiatives is expected to move to the full economic-based methods of Solvency II.

Published 10 October 2011

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