Investor Presentaiton
standard by 2019. In the meantime, a crude approach is being applied to a smaller group of
firms and is likely to be supplemented by an additional capital requirement.
It is unclear as yet as to how the international capital standard will be calibrated; whether it will
have any impact on actual capital levels and whether national regulators will be able to police a
level playing field.
Other regulatory themes remain live. One is the determination of regulators not to allow
insurance companies to engage in any significant way in non-insurance activities. Another is
the possibility of developing a resolution scheme along the lines of that for banks. This of
course again raises the question of capital resources. We are still in the foothills of this but we
can be confident that what regulators think is good for banks, has to be positively disproved in
so far as insurance companies are concerned. Another emerging theme in IAIS is greater
interest in conduct and consumer protection.
Cross-border issues may be even more difficult for insurance companies than banks. What in
practice does it mean for example when life branches have to be backed by appropriate assets?
Why is it that whilst in the European Community regulatory practice is converging, in the US it
remains state-based?
So what does all this mean for Guernsey? In the immediate sense, it may not matter that much.
We are just too small to matter and some of our key insurance sectors are specialized. But, in
other areas, there may be implications; albeit long-term.
We are likely to have eventually an international capital standard. Here, we will have to watch
Solvency II, simply because there is at present no other cross-border approach on these lines.
Cross-border resolution issues may also come more to the fore- and we have several life
companies that operate outside Guernsey. How would we stand if a local protection fund
became mandatory? How might consumer concerns and greater autarchy affect the use of third
party brokers? Will we be able to ensure a reasonable regulatory approach to PCCs, ICCs and
captives in the wake for calls for greater standardisation?
Few of these questions are immediately relevant, given the slow speed at which global
regulation moves. However, it would be wrong to believe that we are somehow forever
insulated from all of this.
Finally, and predating the 2007 crisis, we are already busy implementing the new Insurance
Core Principles in Guernsey. The latter continue to evolve, not least as IAIS issues more
detailed guidance known as Comframe. For example, we are currently concerned that group
supervisory requirements are now being threaded through several of the ICPs rather than
staying under one ICP. This means that a host regime likes ours risks being, marked down on
several ICPs rather than just one. This is one immediate example where international
developments do affect the Bailiwick.
At the Commission, we try to keep in touch with the above developments, given our limited
resources. I sit on the IAIS Technical Committee and chair the Group of International
Insurance Centre Supervisors or GIICS. Last month the Director General was elected by GIICS
to the IAIS EXCO. Caroline Bradley holds the pen on the IAIS captive paper. All of this helps
us see the way the wind is blowing and even I dare say very occasionally blow it in the right
direction.
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