The American insurance risk capital regulation system reform and development

The American insurance risk capital regulation system reform and development

In recent years, countries around the world in terms of insurance solvency regulation has taken a lot of reform measures.In 2007 ~ 2008 of the international financial crisis, although the insurance industry the impact is relatively small, but the speed of innovation, industry itself has become increasingly diversified business structure, new situation and new characteristics of insurance products increasingly complex, has caused close attention from all walks of life.How to build a rigorous, comprehensive, dynamic risk assessment system, become the theme of post-crisis financial insurance regulation reform.America has developed insurance institutions and mature insurance market, insurance regulation system has the profound historical, especially risk regulatory capital system has typical significance.Analysis of its development history, present situation and the reform measures, and new trends of reference to compare the eu insurance regulation, to further improve the system of insurance regulation in our country is of positive significance.American venture capital regulation system establishment and development of the American "legislative management, the coordination of supervision" insurance regulatory system.In the maintenance of stable operation of insurance market, through the analysis of capital adequacy regulation to indirectly control the minimum solvency of insurance company.In the early 1990 s, American Association of Insurance Commissioners (National Association of Insurance Commissioners, NAIC decides) requirements of "venture Capital" in reference to the banking regulatory standards, began to introduce venture Capital supervision System (Risk -based Capital System).RBC regulation system has one of the most remarkable characteristics, that is in full consideration of assets and liabilities by conservative estimates, on the basis of all kinds of risks faced by according to the insurance company's business scale and degree of risk to set capital requirements, and thus requires insurance companies to real capital limit should match the scale of the business.Particular way is: first of all, will face the risk of insurance company is divided into several categories, for legal and accounting statements of related projects assigned to the corresponding risk adjustment coefficient after aggregation, after adjusting for risk, it is concluded that the lowest risk of insurance company capital requirements;And then assess the insurance company's actual capital available, with the actual capital divided by the lowest risk capital requirements, which concluded that the RBC ratio, so as to examine the company's solvency.Considering the different types of business insurance company underwriting risk and management risk, NAIC decides after extensive research, for life insurance, property/casualty insurance and health insurance companies perform different formula of RBC.Due to the focus of RBC's regulatory framework is specific types of common major risks insurance company, every kind of RBC formula is a common formula (generic formula).

Over the past 20 years, the United States department of insurance regulation has been to adjust its regulatory system, and made some progress.For example, in the late 1990 s, represented by variable amount of life insurance in life insurance business portfolio of innovative products of the importance of improving.To accurately assess the influence of different product combination of specific company risk, NAIC decides in RBC life insurance company in the regulatory system of additional risk capital measurement method of internal model (internal - models -based approach), at the same time promote the life insurance reserves calculation from the rule base to principles;In 2006, NAIC decides to absorb the U.S. sarbanes-oxley (sarbanes-oxley Act) Model, the Audit rules demonstration method (Model Audit Rule) reformed (2010);In addition, NAIC decides in corporate governance, comprehensive risk management (ERM)
And other areas of risk management to the risk guidance method, introduces a new risk assessment mechanism (2010).Insurance regulators in the United States, it is worth mentioning, claim to the insurance company's financial report, since 1992 has been implanted with the composition of counter-cyclical supervision, which requires life insurance companies to set up Asset appraisal (Asset Valuation Reserve, AVR), to absorb due to changes in credit risk and market value of investment gains and losses, so as to smooth sharp fluctuations in investment profit and loss of capital and surplus.

RBC regulation system and the primary difference between European Ⅱ after continuous adjustment, RBC regulation system has been mature in the United States.At present, in addition to the United States, Australia, Canada and other countries and regions took a similar regulatory system, another representative of solvency regulatory system is that the eu model.In 2007, the European Union put forward the implementation of insurance solvency Ⅱ (hereinafter referred to as "European Ⅱ"), by strengthening risk orientation, internal control and to strengthen market discipline, form a number of required standards and regulatory inspection process and regulatory reports, public information disclosure system of the three pillars.Overall, the above two kinds of supervision system there are three significant differences: first, different regulatory model.By comparison, the U.S. regulatory system based model of regulation, more focus on rules and principles in the European Ⅱ regulatory composition more.The United States, for example, RBC's regulatory system is the basis of the general formula of main consideration similar common risk faced by insurance company, even into the internal model, is only used to supplement the standard method, to ensure capital requirements not too low.In terms of its applicable scope, the new operation is limited to life insurance and annuity, and need to determine situational analysis as the foundation.On the contrary, the European Ⅱ system for euro I made a thorough reform of regulatory capital framework, based on the evaluation of the economic capital, based on the individual risk of insurance company to undertake assessment solvency risk, fully considering the individual difference, encourage the use of the internal model, prompted the company risk management system designed for himself.Again, such as investment regulation, although the United States investment regulation vary, but generally require most assets investment in high quality tools, while European Ⅱ tend to perform "cautious" approach (prudent person approach).

Second, different measurement standard system.According to the European Ⅱ framework, if the insurance company capital levels below the solvency capital requirement (solvency capital requirement, the SCR), regulatory intervention.Ou Ⅱ emphasizes the inner relation between different risk categories of insurance products, encourage the specific situation of the insurance company according to their respective risk bearing design of insurance products, conducting insurance business.Company can according to the standard formula, the internal model and internal model and some combination of standard formula to calculate the SCR, but there is a standard is consistent, namely the SCR is value at risk (VaR) of 99.5%, or an insurance company of the ruin probability must be less than 0.5% a year.While the RBC system does not use value at risk or extreme value at risk to calibration standard formula, in a variety of risks, and simply assume that the covariance of 0 or 1.Third, different risk range.European Ⅱ emphasis on system design of catastrophe risk, investment risk, assets and liabilities not matching and so on the new risk assessment and risk prevention and control, establish a more rigorous, comprehensive, dynamic risk assessment system.Relative to the RBC system in the United States, the European Ⅱ system considering the risk to a wider range,
For example, which covers the catastrophe risk and operational risk;And the United States is considering the property explicitly consider catastrophe risk factors in the formula of RBC, also did not consider the risk of mortgage and bond spreads to expand.In essence, these differences reflect the differences between Europe and the United States in the insurance regulatory fundamental starting point.The RBC system focuses on the solvency capital requirement, its standard is based on regulatory stance, to protect all the people of the policy set, measures the common risk;While the Ⅱ more inclined to measure solvency economic view, the individual risk according to the insurance company to calculate capital requirements, reflect the specific insurance company's degree of risk, to protect consumers' rights and interests of both shareholders' interests at the same time.

American insurance solvency regulatory system in the financial crisis, the development trend of American international group (AIG), the United States, such as the metropolitan life insurance company has been seriously affected.This also objectively reflects the current insurance regulation system in the United States have not well adapt to new environment and industry to a new stage of development.In view of this, NAIC decides to comprehensively review the regulatory system, and promoting the Modernization of the Solvency in 2008 project (Solvency Modernization Initiative, SMI).In the international insurance regulation, banking supervision and the latest progress in the international accounting standards are studied on the basis of the NAIC decides is evaluating the possibility of the implementation of these practices, to update the existing solvency regulatory framework.The focus of the SMI includes five key areas: capital requirements, legal accounting and financial reporting system, corporate governance and risk management regulation, reinsurance and insurance group, in 2012 reform model laws or measures are put forward.Progress till now, the American insurance regulatory reform mainly has three trends: first, the RBC is still considered as the essential elements of regulatory solvency, but need to be further modified and perfected.Because existing RBC formula can not fully reflect the status of the risk of the insurance industry under the new environment, regulators are considering to adjust formula of RBC, including modification of risk adjustment coefficient formula, reconsider the need to cover the risk of scope, calibration, etc.;If the risk adjustment coefficient is not enough to reflect the specific risk, will continue to introduce more advanced methods (such as internal model method) as a supplement.Second, the current regulatory system there will be no radical change.U.S. regulators based on regulation of economic capital reserved all the time, thought of economic capital is the company's risk management tools, and RBC system is service for regulatory purposes.From a practical point of view, the insurance regulatory department has a lot of data information, can through the study of the objective analysis and evaluation of company risk, to found enterprise high risk behavior, it is also a RBC regulation system can effective important premise in the United States.As SMI group chairman Christina Urias said, "the United States to choose a suitable text book solvency regulatory system is successful. The reason to consider to change, because in different economic environment and under the background of globalization. Our regulatory system is still to make sure that regulators and the public, the insurance company has sufficient financial strength to fulfill the responsibility. This is our priority" modernise solvency.It is clear that the United States regulatory reform orientation, namely the current regulatory system to supplement and correction, rather than the reverse.

Third, to strengthen supervision coordination.Mainly embodied in two aspects: one is the domestic regulatory coordination.For a long time, the American is an independent regulatory states, voluntary interstate coordination system of insurance regulation, a lack of federal
Level of supervision coordination, which is unfavorable for the prevention and management of systemic risk, the disadvantages exposed in this financial crisis.According to the dodd - frank Wall Street reform and consumer protection act, the United States within the Treasury set up National Insurance Office (Office of the National Insurance), comprehensive monitoring, the Insurance industry, information collection, provide the necessary information and resources, to help resolve systemic risk.Second, the international regulatory coordination.The national insurance office also takes another important mission, which stands for the United States to participate in the international insurance industry consultation, to coordinate international insurance problems.At present, the international association of insurance commissioners (IAIS) has been a common framework of cross-border insurance group supervision, the United States department of insurance regulation also hope to promote the internationalization of solvency conditions have been met.In spite of this, the United States will continue to adhere to the consumer protection as the primary regulatory goal, so will be committed to improve the regulatory system designed for regulatory purposes set RBC.