Working Party State Working Party State Supervision MeetingSupervision Meeting
XIIIth AIDA World Congress XIIIth AIDA World Congress ParisParis
18 May 201018 May 2010
1. Welcome and introduction to the topic: Impact of the financial crisis on the supervisory systems
2. Questionnaire: Impact of the financial crisis on the supervisory systems – Country Reports- Argentina - Australia- Denmark- France- Germany - Greece- Hungary- Ireland- Israel - Italy- Sweden- Switzerland
AGENDA I
3. Panel discussion on the reports4. Next Meeting5. Any other business
AGENDA II
WORKING GROUP STATE SUPERVISION
THE IMPACT OF THE FINANCIAL CRISIS ON THE INSURANCE SUPERVISORY
AUTHORITIES
ARGENTINA
PUBLIC ACT 20.091
ON INSURERS AND THEIR CONTROL
BROAD POWERS
EFFECTS OF THE GLOBAL FINANCIAL CRISIS
NO SIGNIFICANT EFFECTS
• CAPITALIZATION OF A LOCAL BRANCH
• INVESTMENTS ABROAD
• ARGENTINE TREASURY BONDS
HOWEVER
LOCAL FINANCIAL CRISIS2001/ 2002
BROAD ARBITRARY POWERS
MEASURES
A) TECHNICAL RESULT
B) RESERVES
C) BOARD DIRECTOR´S RESPONSIBILITY
D) SOLVENCY PARAMETERS FLEXIBILITY
E) INVESTMENT ABROAD
AMENDMENTS OF THE INSURANCE SUPERVISORY LAW
2 REGULATIONS ON INVESTMENT POLICY AND PROCEDURE
6 REGULATIONS ON RESERVES
5 REGULATION ON PREMIUMS AND POSITIVE TECHNICAL RESULT
4 REGULATIONS ON ADMINISTRATIVE PROCESSES AND INTERNAL
CONTROLS
3 REGULATIONS ON MINIMUM CAPITALS
1 MODIFICATION TO ACT: REGULARIZATION AND FINANCIAL TURNAROUND OF ENTITIES, REORGANIZATIONS AND TEMPORARY EXCEPTIONS TO THE REQUEST SOLVENCY PARAMETERS
FUTURE
SOLVENCY II
THANK YOU
WORKING GROUP STATE SUPERVISION
EL IMPACTO DE LA CRISIS FINANCIERA EN LAS AUTORIDADES DE SUPERVISIÓN DE
SEGUROS
ARGENTINA
LEY 20.091
DE LOS ASEGURADORES Y SU CONTROL
AMPLIOS PODERES
EFECTOS DE LA CRISIS GLOBAL FINANCIERA
SIN EFECTOS TRASCENDENTES
• CAPITALIZACIÓN DE FILIALES LOCALES
• INVERSIONES EN EL EXTERIOR
• BONOS DEL TESORO ARGENTINO
PERO
CRISIS FINANCIERA LOCAL
2001/ 2002
AMPLIOS PODERES DISCRECIONALES
MEDIDAS
A) RESULTADO TECNICO
B) RESERVA
C) RESPONSABILIDAD CONSEJOS DIRECTIVOS
D) FLEXIBILIDAD EN PARAMETROS DE SOLVENCIA
E) INVERSIONES EN EL EXTERIOR
MODIFICACIONES DE LA LEY DE SUPERVISIÓN DE SEGUROS
2 NORMAS SOBRE POLITICA Y PROCEDIMIENTO DE INVERSIONES
6 NORMA SOBRE RESERVAS
5 NORMAS SOBRE PRIMAS Y RESULTADO TECNICO POSITIVO
4 NORMAS SOBRE PROCESOS ADMINISTRATIVOS Y CONTROLES INTERNOS
3 NORMAS SOBRE CAPITALES MÍNIMOS
1 MODIFICACIÓN LEY: REGULARIZACIÓN Y SANEAMIENTO - REESTRUC- TURACIÓN - EXCEPCIONES PARÁMETROS DE SOLVENCIA
FUTURO
SOLVENCIA II
GRACIAS
Australian Response
AIDA Working Group State Supervision
The insurance supervisory framework in Australia is split between two key regulators:
1.1 Can you give a short overview over the insurance supervisory framework (eg bodies, structures and law) in your country immediately before the GFC?
the Australian Prudential Regulation Authority (APRA) - the prudential regulator responsible for solvency of authorised general and life insurers, and
the Australian Securities and Investments Commission (ASIC) -
the regulator responsible for the main consumer protection legislation applying to insurers.
Other regulators are responsible for other legislation impacting on insurers.
21
APRA
oversees banks, credit unions, building societies, general insurance and reinsurance companies, life insurance, friendly societies, and most members of the superannuation industry.
is funded largely by the industries that it supervises.
was established on 1 July 1998.
supervises institutions holding approximately $3.6 trillion in assets for 22 million Australian depositors, policyholders and superannuation fund members.
22
Prudential regime re GFC
Pre GFC regime was sophisticated because of failure of Australia's 2nd largest general insurer, HIH in 2001. AUD$5.3 billion in losses were borne by former policy holders.
Primarily risk based, consultative and consistent with international best practice and has:– Preventive powers– Correction powers– Failure management powers– Data collection powers
Funded by levies from industry
23
ASIC and Consumer Protection regime
ASIC is Australia's corporate regulatory body and regulates the main insurance consumer protection legislation:the Corporations Act 2001 (Cth), in particular Chapter 7 (introduced in 2001) which imposes:
– a licensing regime
– consumer protection disclosure obligation and provisions compulsory binding external dispute resolution schemes
the Insurance Contracts Act 1984 (Cth) (introduced in 1986) – amends common law and sets out rights and obligations of insurers and insureds aimed to provide fair balanceIndustry supervision - voluntary codes:
– General Insurance Code of Practice
– Insurance Brokers Code of Practice
24
General view:impact has not been as great as feared given the pre GFC failure of HIH as referred to above and Australia's relatively strong economyample capacity generally and plenty of competitionunderwriting more and more targeted and accountabletrade credit insurers have suffered in Australiaworkers compensation insurance rate increasesprivate insurers, due to failures of builders, have withdrawn from the builders warranty market forcing the Government to take overGFC related claims against financial planners/mortgage brokers - withdrawal from the market of many PI insurers and cost increases, and reinsurance rates and appetite for unusual non traditional risk more limited.
2.1 Please summarise how the GFC has affected – or been perceived as having affected – the insurance / reinsurance market in your country?
25
There have been no insurer failures in Australia since the GFC.
GFC has also focussed many insurers on reviewing portfolios and running off/selling unprofitable ones and acquisitions are continuing in Australia where appropriate.
2.3 Have there been any notable developments in the run-off or discontinuation of risk carrier or intermediary business, in particular, what particular classes of business have been affected?
26
3.1 What examples are there during or since the GFC of the insurance supervisory authority of your country taking specific steps to influence, control or intervene in the conduct or operations of insurance / reinsurance risk carriers, or their directors and officers?
No formal intervention occurred.
APRA probably monitored entities impacted by foreign events pursuant to preventative powers.
27
3.2 Were the powers of intervention – existing before and during the GFC – of your country’s insurance supervisory authority sufficient?
Regulation is one of most interventionist in western world.
APRA's view is regime was sufficient but regulatory framework was in need of refinement.
Since GFC various refinements have taken place to enhance and improve rights that already exist but which will have a significant impact on industry.
28
3.3 Have there been any examples during or since the GFC of the payment of insureds'/policyholders' claims being at risk from the potential insolvency of an insurance / reinsurance risk carrier or intermediary?
No major Australian insurers or reinsurers have failed or were subject to regulatory intervention so as to put policyholder claims at risk.
The number of claims being made has increased and will continue to be at a heightened level until effects of GFC are fully absorbed. The level has not been as high as anticipated.
29
4.1 In general terms, what (if any) changes have there been in the regulatory framework for the insurance or reinsurance industry since the onset of the GFC? In particular: Has there been an increase in funding or manpower for any supervisory authority? Has – in consequence of the GFC – the insurance supervisory/regulatory law and the powers of intervention been tightened in your country?
No mass of new regulation/significantly tightened controls 2008:
– extension of who must be authorised– approved capital requirements/reinsurance fine tuning– New Financial Claims Scheme
2009:– group supervision– new reporting requirements for intermediaries– executive remuneration– credit rating agencies licensing
30
4.2 What (if any) changes are currently being discussed or proposed with respect to any part of the regulatory framework governing the insurance / reinsurance industry (eg further legislative proposals / draft bills / self regulation directives issued by the supervisory authority / increase in staff / more financial resources / modification of the authorities’ structures, eg merging of banking and insurance supervision)?Proposals to implement:
changes to prudential reporting framework a capital review changes to national claims and policies database information on event reporting with ICA supervision of conglomerate groups improvements to preventative powers, correction powers, failure management
powers, investigative powers and data collection powers, levy collection fine tuning re Auditor and actuary appointment FCS improvements
31
32
Working group state supervision:Denmark
Presented by Åse Kogsbøll, Industriens Pension
(as per 6th of May 2010).
33
About Industriens Pension
• Founded 1992• Labour Market Pension Fund, 2nd pillar: DC• 400,000 members (as of 1/7/2009: contributions
are 12 per cent of the wages)• AUM DKK 75 bn. (EUR 10.0 bn.)• Benefits: retirement, disability, death and dread
disease
34
Industriens Pension – Annual return
22,4%
15,4%13,7%
17,2%
8,0%
14,0%
4,6%
11,5%10,0%
16,4%
7,3%
0,2%
4,4%
13,0%
8,4%
-7,4% -0,5% -2,4%
-10%
-5%
0%
5%
10%
15%
20%
25%
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
Gn
s.
Pct.
35
The Danish Pension System
Public Pensions
Company Pension Schemes
Private Pensions
LabourMarket
PensionSchemes
1. Pillar: State pension, ATP, SP/DMP, LD
2. Pillar: Pension Funds/Life Insurance Companies
3. Pillar: Pension Funds/Life Insurance Companies and Banks
36
Pension guarantees 2005 - 2007
None or 0 %
0 – 4 %
> 4 %
37
The insurance supervisory framework
• All financial institutions: Regulated by the Financial Business Act (438 articles) and the same supervision, the Danish FSA.
• The act consists of general and sectorial articles• I 2007 before the crisis:
– Insurance: Individual solvency requirements – In general: Risk based supervision
38
Effect on the insurance market?
• Liability insurances• Increasing unemployment• Life insurances with or without guarantees
39
Regulatory measures
• In fall 2008: The stability agreement between DIA and the government:– Secure stabilitity for pension clients and the Danish
credit-mortgage market.– Direct offshoot of the financial crisis– Temporary agreement.– Prolonged until dec. 2010– Content:
• A more favourable calculation of the reserves of the insurance companies
• Caution and consolidation: A ceiling on the bonus policy
40
New regulatory measures
• A new bill introduced on 26th of March:– Partly adressed for banks, but several changes are
adressed for all financial institutions including insurance companies
– The Danish FSA’s supervision is strengthened (supervising the business models, secure financial stability, early action etc.)
– Focus on the governance of the institutions; new executive orders expected
– Stricter rules of fit & proper– Renumeration policies with FSA supervision
Dewey & LeBoeuf LLPdl.com
Working Group on State Supervision
Presentation toXIIIth AIDA World Congress 17 – 20th May 2010
Yannis Samothrakis
Dewey & LeBoeuf LLPdl.com
The impact of the financial crisis on the insurance supervisory authorities: crises of the supervisory bodies?
Country report: France
Dewey & LeBoeuf LLP | 43
Question 1 – Introductory questions
■ Supervisory bodies before the global financial crisis (GFC):
Until March 2010:
♦ Supervisor: Autorité de contrôle des assurances et des mutuelles (ACAM)
♦ Regulator: Comité des enterprises d'assurance (CEA)
In March 2010, replaced by the Autorité de contrôle prudentiel (ACP), following the merger of the ACAM, the CEA, the Banking Commission (Commission bancaire) and the Credit Institutions and Investment Firms Committee (Comité des Établissements de Crédit et des Entreprises d'Investissement)
■ Legal framework:
Insurance Code
Mutual Code
Social Security Code
Other legal provisions contained inter alia in the Civil Code, the Tax Code and other laws and regulations having an impact on insurance/reinsurance
Dewey & LeBoeuf LLP | 44
Question 2 – Effect of the GFC on the insurance/reinsurance market
■ General considerations:
Impact of the GFC felt on both sides of insurers’ balance sheet – in 2008, market value of insurers’ assets reduced by 5.5%
Some specific lines of business particularly affected with a perceived reduced capacity - such as credit insurers
■ Life assurance
2008:
♦ significant drop in premiums of overall 11%
♦ drop of 41% for unit-linked contracts/funds
2009:
♦ trend was inverted, with premium collections for life assurance progressing by 12% back to 2007 levels
♦ life assurance accounted for about 55% of long-term savings according to the FFSA
■ Property insurance and liability insurance
1% increase in premium collection in 2009, down from 2.5% increase in 2008
Professional risks were stable in 2009, as opposed to a 1.9% increase in 2008
Non-professional risks saw an increase of 2% in 2009
Dewey & LeBoeuf LLP | 45
Question 2 – Effect of the GFC on the insurance/reinsurance market
■Run off or discontinuation of risk carriers:
No perceived increase in run off
Ongoing decline in number of actors in the French market does not indicate any increase attributable directly to the GFC, according to 2009 ACAM figures:
2006 2007 2008 2009
Number of insurers subject to the Insurance Code 407 389 386 377
Number of insurers subject to the Mutual Code 1158 1070 973 880
Number of insurers subject to the Social Security Code 66 63 61 56
■Other developments:
Creation of the ACP
Increased competition
Dewey & LeBoeuf LLP | 46
Question 3 – Regulatory measures
■Supervisory intervention during the GFC:
Survey of ten largest life insurers’ investments
Additional stress tests
Sanctions for life insurers not complying with the legal cap on guaranteed rates of return for with-profits contracts/funds
■Impact of the GFC on the powers of supervisors:
Powers already wide-ranging before the crisis
ACP granted a new mission of safeguarding financial stability
ACP able to issue and enforce good practice
Dewey & LeBoeuf LLP | 47
Question 4 – Amendments to legal framework of insurance supervision
■Resources of the ACP:
No specific increase
Provisional budget for 2010 consists in the sum of the respective budgets of the merged authorities (according to press documentation issued in March by the government)
■Impact of the GFC on the legal framework:
Except for the creation of the ACP, no other change attributed specifically to the GFC
Increase in taxes and levies on insurance and insurers since 2008
Dewey & LeBoeuf LLP | 48
Questions?
Dewey & LeBoeuf LLPdl.com
Contact
■Yannis Samothrakis
■Dewey & LeBoeuf
■51, rue Pierre Charron
■75008 Paris
■+33 1 53 93 77 14
Dewey & LeBoeuf LLP | 50
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AIDA International – XIIIth AIDA World Congress 17 – 20th May 2010
Working Party State Supervision18th May 2010
Gunne W. Bähr, Cologne, Germany
Motive
"Crisis is an efficient state. One has only to remove the taste of catastrophe."
Max Frisch
Content
THE IMPACT OF THE FINANCIAL CRISIS ON THE INSURANCE SUPERVISORY AUTHORITIES:
CRISES OF THE SUPERVISORY BODIES?
- Country Report Germany -
Gliederung
Question 1
1.1 Overview on the Insurance Supervisory Framework
Federal Financial Service Authority (Bundesanstalt für Finanzdienstleistungsaufsicht, BaFin)
Organisation of BaFin laid down in the Financial Service Integration Act (Gesetz über die integrierte Finanzaufsicht, FinDAG)
Supervision of insurance companies is laid down in the German Insurance Supervisory Act (Versicherungsaufsichtsgesetz, VAG)
VAG contains in particular provisions securing the permanent satisfaction of obligations arising under insurance contracts and the protection of the insured
VAG and the Decree on Investment of Insurance Companies (Anlageverordnung, AnlV) supplemented by orders of the BaFin restrict the capital investment of insurance companies
Gliederung
Question 1
1.2 Combination with Supervision of other Financial Services
BaFin was formed on 1 May 2002 by FinDAG
Integrated financial supervisory authority
Merger of the three former supervisory authorities Federal Banking Supervisory Office (Bundesaufsichtsamt für das
Kreditwesen),
Federal Supervisory Office for Securities Trading (Bundesaufsichtsamt für den Wertpapierhandel),
Federal Insurance Supervisory Office (Bundesamt für das Versicherungswesen, BAV)
Question 2
2.1 Effect of the Global Financial Crisis
GFC is not regarded as an insurance crisis in Germany
Insurance companies – as important investors – are subject to the direct and indirect impact of the GFC
Due to the crisis, objections of potential policyholders against taking risks have increased (demand for insurance cover enlarges)
Crisis has shown need for a new solvency system based on a good risk management as laid down by the Solvency II Directive
Question 2
2.2 Effect on Availability and Pricing of Insurance
Credit insuranceIn 2008, claim expenditure of German credit insurers significantly
increased (53.5%) Insurers adjusted their premium and underwriting policies
Life InsuranceProfits of the insurance companies are relatively low in comparison to
the guarantees issued New business as well as profit participations for the year 2010 could by
most insurance companies only be financed through consumption of own capital resources
Disaster/Catastrophe BondsAffected rather heavily by the GFC Hardly any new issues of bonds at the end of 2008, but the market
rallied again
Question 2
2.3 Effect on Run-off
Discontinued business and run-off of risk carriers have already become an important issue before the GFC
GFC can be regarded as one factor of advancing run-off and discontinued business
In 2009, a German life insurer (“Victoria Lebensversicherung”) announced to pass on to run-off business
In respect of implementation of the Solvency II Directive, it is expected that run-off business will increase significantly
GFC had strong influence on intermediary business
In October 2009, one of the major financial intermediaries (MEG AG) applied for the institution of insolvency proceedings
Question 2
2.4 Other Developments
Increase in cost management
Measures to boost profitability
Higher number of aimed marketing measures
Reduction of personnel
Question 3
3.1 Measures of Supervisory Authority (BaFin)
Informal measures
Basic disapprovals
Formal admonishments
Dismissals of directors
Interdiction to act as director
Inception of a special commissioner
Withdrawal of authorisation from an insurance company
Question 3
3.2 Sufficiency of Measures
No principle changes due to GFC
Requirements to take measures were partly eased
Supervisory powers were in some aspects expanded
3.3 Risks for Policyholders
No risk for the payment obvious
No German insurance company obtained money from the state during the crisis
No insolvencies occurred
Question 4
4.1 Changes Regulatory Framework (I)
Legislator took various measures to tighten the insurance supervisory law
Financial Markets Stabilisation Act (Finanzmarktstabilisierungsgesetz) of 18 October 2008
Financial market stabilisation fund
Series of further novelties: appointment of a special commissioner by BaFin
BaFin Circular 3/2009 entitled “Regulatory Minimum Requirements for Risk Management” (Aufsichtsrechtliche Mindestanforderungen an das Risikomanagement, MaRiskVA)
Question 4
4.1 Changes Regulatory Framework (II)
Act to Strengthen the Financial Market and Insurance Supervision (Gesetz zur Stärkung der Finanzdienstleistungs- und der Versicherungsaufsicht) of 1 August 2009
Intensify the supervision of insurance holding companiesProhibit the taking out of loansFix the number of management board and supervisory board
appointmentsFix the reliability and qualification of members of supervisory boards of
insurance companiesStrengthen the position and function of the responsible actuaryConcern the securitisation of insurance risks through special purpose
insurance vehicles Concern the possibility of the imposition of payment prohibitions by the
BaFinConcern risk concentration in insurance groups
Question 4
4.2 Changes currently in Discussion
Draft Act concerning the implementation of special requirements as regards remuneration systems for insurance companies
Law will allow the supervisory authority to prohibit variable remuneration elements or alternatively to limit them to a certain part of the annual result
Rating agencies shall in future be supervised stronger Draft implementation law for the EU Rating Directive
BaFin shall supervise rating agencies until a European Securities Regulatory
Agency will be established in 2011
Solvency II Directive
Thank you for your attention!
Gunne W. Bähr, Cologne, Germany
Dr. Éva DÉRIinsurance lawyer,
Chairman of the Hungarian Chapter of the AIDA WP State Supervision
HFSA, Securities Superv.: suspension for liquidity reasons (end 2008)
Insurers : stop pay-outs to clients investing in such funds behind their unit linked contracts
Standpoint of HFSA, Insurance Superv.: only if contract allows it
Intermediaries: re-partition of the market (since 2008) by transferring of „portfolio” by convincing clients to replace insurance (for
commission) HFSA: increasing number of client
complaints Standpoint of HFSA : portfolio transfer is
not applicable!
Ban activity for max. 90 days if market disorder discovered (Jan 2010)
Maximum penalty increased form 75.000,-Eur to 7.500.000,-Eur (Jan 2010)
HFSA: integrated authority (2000) Setting up of Financial Stability Board (Jan
2010) One-person leadership regime at the top
again (Jan 2010) Merge with National Bank ?
Impact of Financial Crisis on Insurance Supervisory Regime Country Report: Ireland
Tuesday, 18 May 2010
AIDA International Association of Insurance LawWorking Party 6 – State Supervision of Insurance
Question 1: the “old” framework- Combination of national and EU derived legislation
- EU Framework Regulations: life, non-life and reinsurance
- Central Bank and Financial Services Authority of Ireland (since 2003/04)
- Financial Regulator: two directorates – prudential and consumer
- all financial services activities (virtually)- “principles” based not “prescriptive”
Question 2: Global financial crisis (GFC) effects
• Ireland - domestic and FOS/FOE international businesses– downward trend across all lines and products– balance sheets have generally held-up well (e.g. relative to credit
institutions) although some overexposed • Run-offs / discontinuations
– some levels – often more due to lack of critical mass or failed business plan in light of GFC
– portfolio transfers out of the jurisdiction• GFC - capital efficiency / Solvency II drivers
– Ireland as a hub– Zurich, Aviva, Others
Question 3: recent measures• More “hands-on” Financial Regulator• Greater data flow• Movement away from “principles” basis to a proportionate risk
based focus with “credible threat of enforcement”• High Court appointment of administrators
– not seen since the 1980s– two this year
• Quinn Insurance– large domestic player now in administration– required to cease writing UK business
Question 4: changes to regime
• Credit institution regulatory inadequacies exposed• Perceived failures by the Financial Regulator leading
to:– new Central Bank Commission– departures/key appointments – two new “directorates”:
Patrick Honohan (World Bank) and Matthew Elderfield (Bermuda Monetary Authority)
– increased staff levels: focus on enforcement and Solvency II
Question 4: changes to regime (cont)
• Central Bank Bills – potentially three– enhanced accountability at all levels– “patch work” of legislation to be codified– consumer protection remit to move
• Corporate Governance – consultation paper• “Fitness and probity” – directors / key functions• More to follow!
2415322-v1
Impact of Financial Crisis on Insurance Supervisory Regime Country Report: Ireland
Tuesday, 18 May 2010
AIDA International Association of Insurance LawWorking Party 6 – State Supervision of Insurance
www.willamfry.iewww.willamfry.ie
EOIN CAULFIELDPartner – Insurance
TEL. +353 1 639 5000 MOBILE. +353 87 827 2222E-MAIL. [email protected]
WORKING GROUP STATE SUPERVISIONThe impact of the financial crisis on the insurance supervisory authorities: crises of the supervisory bodies? March 2010 Questionnaire, Italy
DLA Piper
May 2010
Question 1 (Introductory Questions)
Question 1 (Introductory Questions)
1.1 Can you give a short overview over the insurance supervisory framework (eg bodies, structures and law) in your country immediately before the GFC?
the Supervisory Authority for Private Insurance Undertakings and Insurance Undertakings of Public Interest (ISVAP)
the Supervisory Authority for Pension Funds (COVIP)
(the Bank of Italy)
(the National Commission for Listed Companies and the Stock Exchange CONSOB)
Question 1 (Introductory Questions)
1.1 Can you give a short overview over the insurance supervisory framework (eg bodies, structures and law) in your country immediately before the GFC?
ISVAP was established under Law no. 576 of 1982. It is mainly responsible for the stability, efficiency and the solvency of insurance undertakings, the consumers information and the protection of interests of policyholders and beneficiaries in general.
Law No. 576 has been consolidated with other insurance laws in the Insurance Code (Legislative Decree no. 209/2005) effective 1 January 2006.
The Insurance Code, the Civil Code and the ISVAP Regulations are presently the main sources of law in the matter of insurance and reinsurance.
The Insurance Code was amended (inter alia) by Legislative Decree no. 56 of 2008, implementing the EU Directive 2005/68 of 2005 on reinsurance and by Legislative Decree no. 173 of 2008, implementing the EU Directive 2006/46 on disclosure of information in the financial statements on the economic relationships with related parties.
Question 1 (Introductory Questions)
1.2 In particular, was the supervision of insurance combined in any way with the supervision of any other financial service (eg banking)?
ISVAP works in cooperation with the Bank of Italy, Consob and Covip as well as the Antitrust authority
Question 2 (Effect of the GFC on the Insurance / Reinsurance Market)
Question 2 (Effect of the GFC on the Insurance / Reinsurance Market)
2.1 Please summarise how the GFC has affected – or been perceived as having affected – the insurance / reinsurance market in your country?
Based on the latest data published by ANIA (the Italian Association of Insurance Companies) it appears that motor liability insurance has been significantly affected by the crisis in 2009
Also premiums in the property sector (fire and property insurance) were affected by the economic downturn
In 2009, premiums written in class III (linked policies) have been 80% lower that in 2008
Question 3 (Regulatory Measures)
Question 3 (Regulatory Measures)
3.1 What examples are there during or since the GFC of the insurance supervisory authority of your country taking specific steps to influence, control or intervene in the conduct or operations of insurance / reinsurance risk carriers, or their directors and officers?
(i) Bank of Italy - Consob - Isvap Documents no. 2 of 6 February 2009 and no. 4 of 3 March 2010
Guidelines for the disclosure in the annual and half yearly financial statements on the going concern assumption, financial risks, test of assets for impairment and uncertainties in the use of estimations.
The purpose of the documents is to ensure that undertakings provide clear and accurate information on the effects of the crisis on profits and losses, assets and liabilities, strategic and operating decisions and any adjustments made to adapt the strategy to the altered environment.
Question 3 (Regulatory Measures)
3.1 What examples are there during or since the GFC of the insurance supervisory authority of your country taking specific steps to influence, control or intervene in the conduct or operations of insurance / reinsurance risk carriers, or their directors and officers?
(ii) Isvap communications
By communications dated 1 July 2009, 20 February 2008, 6 August 2008, 29 September 2008, ISVAP invited all undertakings to carry out proper stress test in order to verify the potential impact of the prolonged crisis on the relevant solvency margins and notify ISVAP of the outcome of such tests
In particular, by communications of 29 September 2008 and 20 February 2008 respectively, ISVAP required specific information on investments made in Lehman Brothers' financial instruments and subprime collaterals
Question 3 (Regulatory Measures)
3.2 Were the powers of intervention – existing before and during the FGC – of your country’s insurance supervisory authority sufficient?
Apparently yes, since no defaults of insurance undertakings occurred as a direct result of the crisis
Question 3 (Regulatory Measures)
3.3 Have there been any examples during or since the GFC of the payment of insureds‘/policyholders' claims being at risk from the potential insolvency of an insurance / reinsurance risk carrier or intermediary?
Various retail banks and insurance companies have offered their customers index polices linked to bonds issued by Lehman Brothers over the 12-24 months before the Lehman Brothers was adjudicated bankrupt. Further to the denial of repayment of premium opposed by some undertakings, many of such investors claimed that these policies were presented to them as “safe investments” fully warranted and sued the relevant undertakings in Court
Question 4 (Amendments of the Insurance Supervisory Law)
Question 4 (Amendments of the Insurance Supervisory Law)
4.1 In general terms, what (if any) changes have there been in the regulatory framework for the insurance or reinsurance industry since the onset of the GFC?
(i) Law No. 2 of 28 January 2009 and ISVAP Regulation no. 28 of 17 February 2009
Legislative Decree on Anti-Financial Crisis Measures No. 185 (Now Law No. 2 of 28 January 2009) was approved with a view to reduce the impact of the financial global crisis.
In accordance with the guidelines set forth by Law No. 2 of 28 January 2009, ISVAP issued the Regulation no. 28 of 17 February 2009 containing the regulatory framework “for the implementation of provisions regarding criteria for the assessment of items listed under assets which are however not destined to remain as long-term company assets, introduced under Decree Law no. 185 of 29 November 2008”
The most significant innovation provided for under the new regulation consists in insurance companies being permitted not to align the budget value of short-term financial instruments to the price deducible from market trends at the end of the year.
Question 4 (Amendments of the Insurance Supervisory Law)
(ii) Isvap Regulation no. 32 of 11 June 2009
On 11 June 2009 Isvap issued the Regulation No. 32 containing new rules applicable to insurance contracts in which the services provided are directly connected to a share index or other benchmark value.
Index-linked policies, which were regulated under ISVAP Circulars no. 332/1998 and no. 451/2001 – haven been reviewed in depth.
The most significant innovation is that the performance and the surrender values of index-linked contracts cannot be directly linked to specific assets held by the insurance company, but only to "official" share indexes, bond indexes and inflation-linked indexes (i.e. those calculated by third parties on the basis of objective and predefined criteria which are widely available and constructed on financial instruments traded on liquid and active regulated markets).
Solvency margins requested to the companies which intend to offer index-linked policies have been increased; from 1% to 4% of technical reserves.
Article 8 also defines the principles of diversification which the insurance companies must observe with reference to all index-linked products. Companies may not invest over 10% of their total technical reserves for such contracts in assets of the same issuer or group.
The index-linked policies are now obliged to guarantee in any case minimum performance in the event of the death of the policyholder, in proportion to the premium paid.
THANK YOU FOR YOUR ATTENTION
XIIIthe AIDA World Congress, Paris – Working Party State Supervision – Impact of the Financial Crisis on the Insurance Supervisory Authorities – COUNTRY REPORT SWITZERLAND
Christian Felderer, General Counsel SCOR Switzerland
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AIDA International – XIIIth AIDA World Congress 17 – 20th May 2010
Working Party State Supervision18 May 2010
Christian Felderer, General Counsel SCOR Switzerland
XIIIthe AIDA World Congress, Paris – Working Party State Supervision – Impact of the Financial Crisis on the Insurance Supervisory Authorities – COUNTRY REPORT SWITZERLAND
Christian Felderer, General Counsel SCOR Switzerland
Impact of the financial crisis on the supervision systems – country reports
Switzerland
XIIIthe AIDA World Congress, Paris – Working Party State Supervision – Impact of the Financial Crisis on the Insurance Supervisory Authorities – COUNTRY REPORT SWITZERLAND
Christian Felderer, General Counsel SCOR Switzerland
Question 1
1.1. Overview on the insurance supervisory framework
Swiss Financial Market Supervisory Authority (FINMA)
Revised Insurance Supervisory Act (ISA) of 22 June 2007
Financial Market Supervisory Act (FINMASA) of 22 June 2007
1.2. Combination
Transition from FOPI to FINMA. Combination of insurance and banking supervision under one federal authority: FINMA
XIIIthe AIDA World Congress, Paris – Working Party State Supervision – Impact of the Financial Crisis on the Insurance Supervisory Authorities – COUNTRY REPORT SWITZERLAND
Christian Felderer, General Counsel SCOR Switzerland
Question 2
2.1. Effect of the Global Financial Crisis (GFC)
Corporate governance and code of conduct
Seven pieces of legislation under the Financial Market Supervisory Authority umbrella
2.2. Effect on availability and pricing of insurance
No Swiss specific effects
2.3. Effect on run-off
No Swiss specific effects
XIIIthe AIDA World Congress, Paris – Working Party State Supervision – Impact of the Financial Crisis on the Insurance Supervisory Authorities – COUNTRY REPORT SWITZERLAND
Christian Felderer, General Counsel SCOR Switzerland
Question 2 – cont’d
2.4. Other developments
No specific other developments
XIIIthe AIDA World Congress, Paris – Working Party State Supervision – Impact of the Financial Crisis on the Insurance Supervisory Authorities – COUNTRY REPORT SWITZERLAND
Christian Felderer, General Counsel SCOR Switzerland
Question 3
3.1. Specific steps taken by supervisory authority
Specific issue and exposure related reporting
Information meetings
3.2. Powers of intervention
No principle changes, due to revised prudential regulation implemented only in 2007
3.3. Risks of insolvency due to GFC
No materializing risk. However, closer individual monitoring.
XIIIthe AIDA World Congress, Paris – Working Party State Supervision – Impact of the Financial Crisis on the Insurance Supervisory Authorities – COUNTRY REPORT SWITZERLAND
Christian Felderer, General Counsel SCOR Switzerland
Question 4
4.1. Changes at supervisory level
No notable increase in funding and manpower
Involvement of outside special experts (e.g. review of financial modeling/SST Models, accounting, legal issues)
4.2. Proposals for change
Supervisory tools to address the too big to fail risk
Limiting economic risks caused by large companies
CEO of FINMA: “Radical changes are required…..”