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Working Party State Supervision Meeting

Working Party State Supervision Meeting. XIIIth AIDA World Congress Paris 18 May 2010. AGENDA I. Welcome and introduction to the topic: Impact of the financial crisis on the supervisory systems Questionnaire: Impact of the financial crisis on the supervisory systems – Country Reports

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Working Party State Supervision Meeting

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  1. Working Party State Supervision Meeting XIIIth AIDA World Congress Paris 18 May 2010

  2. AGENDA I • Welcome and introduction to the topic: Impact of the financial crisis on the supervisory systems • Questionnaire: Impact of the financial crisis on the supervisory systems – Country Reports • - Argentina • - Australia • - Denmark • - France • - Germany • - Greece • - Hungary • - Ireland • - Israel • - Italy • - Sweden • - Switzerland

  3. AGENDA II 3. Panel discussion on the reports 4. Next Meeting 5. Any other business

  4. WORKING GROUP STATE SUPERVISION THE IMPACT OF THE FINANCIAL CRISIS ON THE INSURANCE SUPERVISORY AUTHORITIES ARGENTINA

  5. PUBLIC ACT 20.091 ON INSURERS AND THEIR CONTROL BROAD POWERS

  6. EFFECTS OF THE GLOBAL FINANCIAL CRISIS NO SIGNIFICANT EFFECTS • CAPITALIZATION OF A LOCAL BRANCH • INVESTMENTS ABROAD • ARGENTINE TREASURY BONDS

  7. HOWEVER LOCAL FINANCIAL CRISIS 2001/ 2002 BROAD ARBITRARY POWERS

  8. MEASURES • A) TECHNICAL RESULT • B) RESERVES • C) BOARD DIRECTOR´S RESPONSIBILITY • D) SOLVENCY PARAMETERS FLEXIBILITY • E) INVESTMENT ABROAD

  9. AMENDMENTS OF THE INSURANCE SUPERVISORY LAW 1 MODIFICATION TO ACT: REGULARIZATION AND FINANCIAL TURNAROUND OF ENTITIES, REORGANIZATIONS AND TEMPORARY EXCEPTIONS TO THE REQUEST SOLVENCY PARAMETERS 2 REGULATIONS ON INVESTMENT POLICY AND PROCEDURE 3 REGULATIONS ON MINIMUM CAPITALS 4 REGULATIONS ON ADMINISTRATIVE PROCESSES AND INTERNAL CONTROLS 5 REGULATION ON PREMIUMS AND POSITIVE TECHNICAL RESULT 6 REGULATIONS ON RESERVES

  10. FUTURE SOLVENCY II

  11. THANK YOU

  12. WORKING GROUP STATE SUPERVISION EL IMPACTO DE LA CRISIS FINANCIERA EN LAS AUTORIDADES DE SUPERVISIÓN DE SEGUROS ARGENTINA

  13. LEY 20.091 DE LOS ASEGURADORES Y SU CONTROL AMPLIOS PODERES

  14. EFECTOS DE LA CRISIS GLOBAL FINANCIERA SIN EFECTOS TRASCENDENTES • CAPITALIZACIÓN DE FILIALES LOCALES • INVERSIONES EN EL EXTERIOR • BONOS DEL TESORO ARGENTINO

  15. PERO CRISIS FINANCIERA LOCAL 2001/ 2002 AMPLIOS PODERES DISCRECIONALES

  16. MEDIDAS • A) RESULTADO TECNICO • B) RESERVA • RESPONSABILIDAD CONSEJOS DIRECTIVOS • D) FLEXIBILIDAD EN PARAMETROS DE SOLVENCIA • E) INVERSIONES EN EL EXTERIOR

  17. MODIFICACIONES DE LA LEY DE SUPERVISIÓN DE SEGUROS 1 MODIFICACIÓN LEY: REGULARIZACIÓN Y SANEAMIENTO - REESTRUC- TURACIÓN - EXCEPCIONES PARÁMETROS DE SOLVENCIA 2 NORMAS SOBRE POLITICA Y PROCEDIMIENTO DE INVERSIONES 3 NORMAS SOBRE CAPITALES MÍNIMOS 4 NORMAS SOBRE PROCESOS ADMINISTRATIVOS Y CONTROLES INTERNOS 5 NORMAS SOBRE PRIMAS Y RESULTADO TECNICO POSITIVO 6 NORMA SOBRE RESERVAS

  18. FUTURO SOLVENCIA II

  19. GRACIAS

  20. Australian Response AIDA Working Group State Supervision

  21. 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 legislationimpacting on insurers. 21

  22. 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

  23. 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

  24. 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 balance Industry supervision - voluntary codes: General Insurance Code of Practice Insurance Brokers Code of Practice 24

  25. 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 economy ample capacity generally and plenty of competition underwriting more and more targeted and accountable trade credit insurers have suffered in Australia workers compensation insurance rate increases private insurers, due to failures of builders, have withdrawn from the builders warranty market forcing the Government to take over GFC 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

  26. 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

  27. 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

  28. 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

  29. 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

  30. 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

  31. 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

  35. Public Pensions Company Pension Schemes Labour Market Pension Schemes Private Pensions The Danish Pension System 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

  41. Working Group on State Supervision Presentation to XIIIth AIDA World Congress 17 – 20th May 2010 Yannis Samothrakis

  42. The impact of the financial crisis on the insurance supervisory authorities: crises of the supervisory bodies?Country report: France

  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

  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

  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: • Other developments: • Creation of the ACP • Increased competition

  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

  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

  48. Questions?

  49. Contact Yannis Samothrakis Dewey & LeBoeuf 51, rue Pierre Charron 75008 Paris ysamothrakis@dl.com +33 1 53 93 77 14

  50. Dewey & LeBoeuf Worldwide Moscow London Warsaw Brussels Frankfurt Albany Almaty Paris Boston Milan Chicago Rome San Francisco New York Beijing Silicon Valley Washington, DC Los Angeles Doha Houston Dubai Riyadh Hong Kong Johannesburg

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