U.S. insurance regulation needs more uniformity, G20 financial board says

While there have been some accomplishments in insurance regulation in the United States since 2010, overall, the country needs more uniformity in its approach and modernized solvency requirements, says a report from the G-20’s Financial Stability Board.

In what it calls a peer review of the U.S. financial regulatory system, the FSB notes that the country has made progress since 2010’s Dodd-Frank Wall Street Reform and Consumer Protection Act.

In particular, the creation of the Federal Insurance Office and states’ steps to improve supervisions have been positive, the report notes.

Still, the U.S. lacks uniformity in its approach to insurance regulation, despite the National Association of Insurance Commissioners (NAIC) promoting a degree of similarity among the states, the FSB says.

“The architecture for insurance supervision in the U.S., characterised by the multiplicity of state regulations, the absence of federal regulatory powers to promote greater regulatory uniformity and the limited rights to pre-empt state law, constrains the ability of the U.S. to ensure regulatory uniformity in the insurance sector,” it suggests.

“While the FIO represents the US on international insurance matters and negotiates covered agreements, only the states have the authority (but are under no legal obligation) to implement laws that are consistent with those agreements and  international standards agreed within the IAIS,” the report adds.

The FSB also suggests that to be effective, the NAIC should make its updated Insurance Holding Company Models mandatory for accreditation, since only 15 states have adopted the revisions.