Regulators and insurance industry would both benefit from global regulatory standards

Darren Maher, a Partner and Head of Corporate Insurance at Matheson, spoke at the 2015 European Insurance Forum in Dublin about the movement toward global insurance regulation.

The talk of creating a global regulatory regime started in the immediate aftermath of the most recent financial crisis. Mr. Maher says the industry and regulators realized the current regulatory regimes across the world were not adequate, for either risk management and governance issues.

Solvency II is promoting ‘equivalence’ outside of Europe, but Mr. Maher sees key features of Solvency II forming the basis of a global regulatory regime. Countries are using Solvency II’s risk based capital standards and ORSA with modifications to account for differences between the countries.

Mr. Maher believes there are benefits to global regulation. For regulators, “they can speak to each other on the same level when talking about rules or discussing a global insurer.” For insurance groups the benefits include “consistency in approach and application of rules.”

According to Mr. Maher, resistance to global regulation is coming from the insurance industry. In Europe, the industry has gone through the implementation of Solvency II, which has taken a long time and cost a lot of money in terms of capital and new IT systems. Also, people don’t know what a global regulatory regime will look like.

Mr. Maher would like to see the industry and regulators discuss the minimum capital standards. Regulators should meet and communicate regularly. And for global capital standards to be implemented, it is critical that the industry be included in the discussions. Otherwise, that will create delays in its implementation.