Skinner argues for a global standard on Solvency II

Despite relations between the EU and US insurance regulators being strained of late, due to a dispute over collateral for overseas insurers in the US, Peter Skinner lauded the close relationships between the two and said he expected Solvency II to become a global standard.

The spat hinged on the New York regulator's decision to drop the regulation which requires non-US reinsurers to post double the collateral of domestically registered companies. John Oxendine, Georgia's insurance supervisor and chair of the National Insurance Association's reinsurance taskforce, threatened retaliatory measures by the other 49 states - a stance Skinner characterised as "simply outrageous", before describing US insurance regulation as, "Damaging to the long-term interests of the US market."

But speaking at the Life & Pensions Solvency II and Risk Management conference in Brussels, Skinner adopted a more conciliatory tone, and highlighted the close working relationship between the Committee of European Insurance and Occupational Pension Supervisors (CEIOPS), which is steering the shape of the Solvency II directive, and the International Association of Insurance Supervisors (IAIS), which is also developing a principles-based solvency regime.

Support for Skinner's view that the US and Europe shared a similar approach came from senior figures in the US regulatory and actuarial circles who were present at the conference. Dave Sandberg, corporate actuary at Minneapolis-based Allianz Life and vice president of the life practice council for the American Academy of Actuaries (AAA), said that in principle, the task of reforming the European and US insurance industries was the same - and moving in a similar direction.

"In the US you have to convince 50 states to move in unison - in Europe you need to do the same thing with 27 countries. Given the lack of financial experience in some states, the regulatory imperative is much more focused on the issue of governance than in Europe, but questions like 'what is the MCR and what is the SCR?' are common to both regions."

The issue of convincing a wide number of different entities to agree to a common plan was picked up by Skinner who argued that Europe's - so far successful - attempt to do so was another reason Solvency II was likely to have a global reach.

"With 27 different member states needing to agree on the development of Solvency II, it is a good place to experiment on the make-up of a global framework. It is too early to say for sure but the indications - from both the IAIS, which is developing its own international framework, and the OECD - are that a principles-based approach has caught the imagination."

Skinner emphasised the discretionary nature of the draft Solvency II directive and highlighted the diversity of opinion held within the EU Parliament. "There are 750 members; on one side are the fascists, on the other the communists, with a full rainbow of views in between." But he cautioned that amendments to the directive should only be made in the interest of the whole union and not simply be a function of parochial pressures.

Referring to the 800 amendments tabled for Basel II banking regulations, which he also played a role in steering through the parliament, Skinner argued that in the light of recent market turmoil, "I bet they (the amendment proposers) don't regret the approach we took with Basel II. I am all for amendments to Solvency II, but not when their only purpose is to move the balance of favour in the direction of their local regulatory or business mode, and thereby missing the point of the EU as an organisation of 27 countries."