Learning Center
Plans & pricing Sign in
Sign Out



									Rules and Problems of
Reinsurance Regulation

Michael Theilmeier
Russian Insurance Summit
Saint Petersburg, 29 May 2005

A Berkshire Hathaway Company
Reinsurance Supervision in Europe in the Past

Very different legal regimes in individual countries:

• Supervision similar as for Primary Insurers

• Supervision only limited (esp. financial stability)

• "indirect" supervision via control of reinsurance of Primary

• No supervision; reinsurance not treated as insurance at all
Numerous Initiatives & Changes
(especially after Sept. 2001)
• Supranational
  Discussions on supervision of reinsurers intense since end of the 90s

  October 2002:
  – OECD required implementation of an international system of supervision of
  – IAIS issued principles on minimum requirements for supervision of reinsurers

• National level
  Several countries increased level of supervision of reinsurers

  e.g. Germany (Law of 15th Dec. 2004):
  – Licensing requirements
  – Solvency rules
  – Stricter financial & legal controls
EU Directive on Reinsurance
• “Fast track“ procedure to harmonize the supervisory regime for
  – Draft by European Commission: 21st of April 2004
  – Passage of Directive expected: June 2005
• Basis are rules of supervision for Primary Insurers in set of existing
  Directives – if suitable for reinsurers
  – Licensing requirements
  – Rules on technical reserves, solvency
  – Home country supervision
• Welcomed by everyone – only a handful of major rules has been
  discussed intensively
EU Directive on Reinsurance
- Major Issues -

Decision on issues under discussion has been reached

• Solvency rules for non-life reinsurance also apply for life reinsurance

• Only qualitative criteria for invested assets - "prudent person principle";
  member states may require qualitative criteria for asset classes

• Requirement for depositing security by law is banned –
  3-year transition period – instead of 2 years
Reinsurance Supervision
- The Future -

• EU directive on reinsurance only "starting point"

• Solvency II & IAS process will also be relevant for reinsurance

• Harmonized EU reinsurance supervision to enhance dialogue with the
  US concerning harmonization of rules

Indirectly, worldwide standards will develop as requested by OECD
Indirect (via Primary Insurers) Reinsurance
Supervision – A Powerful Tool

• Almost all countries have some form of indirect reinsurance supervision

  "The reinsurers chosen by the primary insurers must have a stable
  financial standing and must be willing and able to meet their obligations
  when they become due." (German Supervisory Authority, circular letter
  R 1/97)

• Partially: minimum rating requirements

• IAIS has started to build database on top 50 reinsurers to reach more

Financial security and integrity are the key aspects

Harmonization on both primary insurance and reinsurance will help to
 establish secure & efficient markets

To top