Members of the National Association of Insurance Commissioners (NAIC) have expressed concern over the “breakneck speed” at which global capital rules are being pushed through, and have said they may choose to ignore the new standards.
NAIC added that there was no proven need to regulate insurance capital on a global level, according to a Reuters report. Officials also said they were concerned policyholders would end up footing the bill for any extra capital demanded.
“This is breakneck speed…Where is the need?” NAIC President-Elect Monica Lindeen told the news agency.
The move comes after leading NAIC officials visited London, where global regulators attempted to push agreement to adopt the new rules within three years.
The US will be required to take a position on the rules when the leaders of the Group of 20 economies meet in November.
The rules, which were proposed by the International Association of Insurance Supervisors (IAIS), aim to protect nations’ taxpayers from bailing out major insurers that encounter trouble. The first of the three rules, called the basic capital requirement, would require nine major insurers to have access to a certain amount of capital—though exact amounts have not yet been detailed.
The second rule, the higher loss absorption capacity (HLAC), asks the insurers to have a cushion of extra funding that can be converted to capital in the case of a crisis.
The third rule would be written in 2016. All three would take hold three years later, in 2019.
The nine insurers—which include
Allianz,
AIG and
MetLife—were deemed by the IAIS as so large, their failure would damage the entirety of the global financial ecosystem.
Part of Lindeen’s objections to the rules stem from her belief that US insurers are already adequately capitalized. Though NAIC and other US regulators have not developed a firm stance on the rules, Lindeen says it’s too soon to commit.
“Until anybody sees it, then it’s hard to say,” she told Reuters. “If it’s going to hurt the consumer and if it’s going to hurt our market, that’s an issue.”
NAIC also noted that the US is not alone in its reservations.
Meanwhile, IAIS Secretary General Yoshi Kawai expressed confidence earlier this month that a basic capital rule would be established by November.
“It will come and you should prepare,” Kawai said during a banking conference. “HLAC should be meaningful, otherwise why do we do this system?”
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