WASHINGTON, Aug. 28 -- The American Insurance Association issued the following news release:
The American Insurance Association (AIA) filed comments in response to the Federal Insurance Office's (FIO) notice in the June 27, 2012Federal Register entitled "Public Input on the Report to Congress on the U.S. and Global Reinsurance Market." AIA's diverse membership writes insurance and reinsurance in both the U.S. and abroad. AIA's comments emphasize the importance of reinsurance to the primary insurance market and our interest in making certain that the U.S. regulatory system does not lead to market disruption or disadvantage U.S. competiveness abroad. AIA's comments also point out a number of international trade barriers for reinsurance that affect its members.
"As regulated insurance companies, AIA's members have a substantial stake in maintaining an effective and efficient insurance regulatory system," said Steven Bennett, associate general counsel for AIA. "We continue to emphasize that the domestic and international regulatory systems ought to foster the growth of vibrant private, competitive insurance markets."
Reinsurance plays a critical role in maintaining financial stability and decreasing concentration of risk for insurance companies. A recent report on reinsurance and financial stability by the International Association of Insurance Supervisors (IAIS) stated that reinsurance can be both a source of stability during crisis and risk-diversification for primary insurers. The IAIS report also concluded that traditional reinsurance and the bulk of alternative risk transfer mechanisms utilized by reinsurers are not sources of systemic risk and do not have the potential to be a threat.
"The current reinsurance regulatory environment correctly allows for market competition rather than government price controls," said Bennett. "Pricing is allowed to ebb and flow with reinsurance capacity. This strong market would be weakened if the states were to adopt the same government price and product controls that apply to primary property-casualty insurance."
AIA's comments also point out a number of international trade barriers for reinsurance that affect its members, including restrictions in Argentina and Brazil, and the advent of so-called Part VII transfers in the U.K and elsewhere (a development that has made its way into some state bills). AIA strongly encourages the FIO to work with its counterparts in the IAIS and related supervisory associations to encourage the respective government entities to reconsider these misguided regulations.
"Overtly protectionist reinsurance regulations adopted by Argentina and Brazil unfairly restrict trade," said Bennett. "Requiring foreign insurers to cede high percentages of risk with local insurers leads to a concentration of too much risk within one nation's economy."
A complete copy of AIA's comments is attached.
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