Tag: International Issues

NCIGF & NOLHGA Host Successful Gathering of Global Insolvency Officials

Roger Schmelzer Leave a comment

Just prior to the NAIC meeting in Austin, TX was the annual conference of the International Forum of Insurance Guarantee Schemes (IFIGS) in Washington D.C. NOLHGA served as co-hosts. This was my final duty as 2019 chairman of IFIGS. 17 of the 24 IFIGS members attended and we had about 60 people altogether at the conference on December 4. Special thanks to NCIGF board members Keith Bell, Joyce Mellinger, Smitty Harrison and Brad Roeber for their attendance and support.

Roger Schmelzer chairs the IFIGS meeting in Washington, D.C.

 

We covered a number of topics that are important to those who track international resolution matters. The benefit to us of IFIGS participation is a platform to keep our tested public policies and structure in front of the international standard-setters, including our own regulators who participate. This is another example of how NCIGF is expected to carry the water as subject matter experts on insurance liquidation public policies. Some takeaways for your consideration:

 

  • Tom Sullivan from the Federal Reserve (and member of Team USA) and David Wilson from the CA Liquidation office also participated in panel discussions. Securing their participation was strategically significant to us as it further builds the credibility of the U.S. guaranty fund system as opinion leaders and solidifies our strategic objective to be the definitive leader on matters concerning insurance liquidation and policyholder protection.
  • At the business meeting on December 5, the IFIGS membership approved every initiative presented as part of the strategic plan I put forward at the start of the year.
  • My goal as IFIGS chair was to assure a more stable, dependable and durable organization that would have credibility with supervisors around the world. Having that available will help NCIGF and NOLHGA represent our interests before international standard-setters. Structurally, that mission is well on its way to accomplishment and will be spurred further by the dynamic leader of the Canadian P/C guaranty fund we recruited to succeed me as chair.
  • The next step is to achieve financial continuity to carry IFIGS into the future.

 

I appreciate the support of the board for me to serve as chair in 2019 and am glad to pass on those duties. It was a worthwhile exercise and should be helpful in 2020, which is expected to be an active year internationally:

 

  • The IAIS Resolution Working Group (ReWG) is preparing to take up an advisory paper on insurance company resolution. We’ve been in close contact with FIO’s Alex Hart who chairs the group and I expect we will have excellent input.
  • Perhaps the most critical interaction at the IFIGS meeting was with Dimitris Zaferis, lead staff person for EIOPA. His organization is in the process of establishing “harmonisation” standards for resolution schemes in Europe (some of which have yet to be created). It’s important that major aspects of U.S. public policy (post-funding, primacy of policyholder protection, for example) be recognized as viable policies by EIOPA and the other international regulatory standard setters. Working both as the U.S. and as part of IFIGS, we should be well-positioned to effectively make our case.
    IFIGS Group

NCIGF Leaders Address Global Resolution Experts in Taiwan

Robin Webb Leave a comment

NCIGF Vice Chair Chad Anderson (WGFS) and NCIGF CEO Roger Schmelzer recently returned from the Asian International Forum of Insurance Guarantee Schemes (IFIGS) meeting held in Taipei, Taiwan. Both spoke to a roomful of 150 Public officials and academics from throughout Asia about the value of insurance guaranty funds.

Chad Anderson presents to the group.

Anderson delivered a robust briefing on how the U.S. property and casualty safety net works and the system’s place in state-based insurance regulation. It was an important presentation because most of the audience was not familiar with consumer protection for casualty products. Nearly all the topics addressed in the two-day meeting involved life mechanisms with an emphasis on avoiding failure altogether and efforts to assist regulators in achieving that end.

Delivering the keynote speech as chairman of IFIGS, Schmelzer outlined common objectives for all nations with policyholder protection laws; early involvement, prioritizing insurance customers and making sure regulators had a full and accurate understanding of how guaranty programs work, concluding by saying that meeting these elements will help to stabilize economies around the world.

Schmelzer pointed to deliberations anticipated later this year by international regulators (including representatives from the United States) on the ideal future state of guaranty systems worldwide. He cited these talks as a critical opportunity to help regulators generate a comprehensive body of knowledge and realistic expectations of insurance safety nets and their missions. Schmelzer also asserted that it was equally important to create an understanding that there is no single best way to protect consumers.

Roger Schmelzer gives his keynote address.

U.S. Leads Insurance Policyholder Protection Around the World

Roger Schmelzer Leave a comment

(Originally published in the Spring 2019 issue of The Insurance Receiver and is reprinted with the permission of IAIR)

On January 1, I began a one-year term as Chairman of the International Forum of Insurance Guarantee Schemes (IFIGS). My colleague at NOLHGA, Peter Gallanis has been involved since the earliest days of IFIGS and I joined him a few years ago.

The objectives of the Forum are to facilitate and to promote international cooperation between Insurance Guarantee Schemes and other stakeholders in the development of policyholders’ protection. From time to time it may communicate views, ideas and experiences to interested parties. IFIGS is a voluntary not for profit membership network. It is independent of any government authority.  Currently there are twenty-five members and the membership is growing.

I took on this responsibility because of my very strong sentiment that the insurance industry is absolutely essential to the world economy.  The insurance promise makes opportunity a possibility. Our support of it keeps the industry strong and gives comfort and peace of mind to policyholders. Guaranty mechanisms ready to protect insurance consumers undergird the sanctity of the insurance promise by assuring the viability, commitment and reputation of the insurance industry.

IFIGS is well-positioned to be the global definitive expert on supporting the insurance promise. All protections do not have to be structured the same way, but the important role of policyholder protection mechanisms must be articulated clearly and effectively to regulators as they work as overseers of the global insurance industry.

To build the value of the organization, IFIGS members have set three long-term strategic objectives:

  • Information Sharing. IFIGS will collect information and be the global expert regarding insurance guarantee schemes and will be an active resource for IFIGS members, supervisors and standard-setters.
  • Member Outreach. IFIGS will develop a plan for actively recruiting new members and encouraging more active participation and leadership by existing members.
  • Reputation Enhancement. IFIGS will work to heighten its profile with supervisors and standard setters, including those that may be involved in developing new insurance guarantee schemes.

Examples of IFIGS effectiveness are not hard to find:

1. The consultation paper published by the IAIS in mid-November, 2018 concerned a proposed holistic framework for the assessment and mitigation of systemic risk in the insurance sector. The initial IAIS consultation included the following statement:

“In addition to the direct economic effects of an insurer’s failure to pay claims on consumption, by a reduction of policyholders’ wealth, a number of correlated failures could have additional knock-on effects, such as through some insurance guarantee schemes.”

IFIGS, in partnership with NOLHGA and NCIGF, commented on the consultation paper and strongly objected to that statement. The offending comment was removed from the revised paper.

It would have been nothing short of a disaster for global regulators to continue their consideration of approaches to insurer oversight if they believed that policyholder protection schemes could spread contagion! It could take decades to change that thinking and no one country could do that alone. But by working together, IFIGS and its members played a strong advisory role that regulators took seriously. That is the value of being collaborative and building on that strategy.

2. A July 2017 paper published by EIOPA (European Insurance and Occupational Pensions Authority) stated that a minimum degree of harmonization of policyholder protection schemes in the European Union would benefit policyholders, the insurance market and the financial stability of the EU. IFIGS was invited to present on the role that insurance guarantee schemes can play in resolution during an EIOPA recovery and resolution seminar.

Thanks to our active participation in IFIGS, the U.S. made a joint presentation (with Greece) to an audience of European regulators and companies, and our presentation drew more interest from the audience than any other presentation over the day and half seminar. From this experience it was confirmed what we had already learned; that European regulators are very curious about our state-based system of policyholder protection. As EIOPA continues to deliberate on harmonization, the background we provided should prove useful.

3. Finally, on another occasion, Peter Gallanis and I, joined by a colleague from Canada, were asked to represent IFIGS before a working group of international regulators (including James Kennedy from the Texas DOI and Alex Hart from the Federal Insurance Office) who were drilling down on the relationship between regulators and policyholder protection mechanisms. My understanding is that we were helpful in providing background on ways to collaborate to provide a more effective safety net to consumers.

 

A primary goal is to spread the value of our engagement with IFIGS to IAIR and the NAIC. And to take that back to the IFIGS membership and international regulators. Our resolution mechanism—composed of receivers and guaranty funds– is by far the most experienced and effective system in the world. The broader the expertise we can bring to the table, the more impactful we can be on behalf of the individual policyholders and claimants we serve.

For more on particulars of other mechanisms around the world, a good, but not definitive, resource is a discussion paper published by EIOPA. https://eiopa.europa.eu/Publications/Consultations/EIOPA-CP-18-003_Discussion_paper_on_resolution_funding%20and.pdf)

I am happy to discuss this organization and the value of the United States’ participation.  Please feel free to contact me.

Further information may also be obtained from the IFIGS website at www.ifigs.org.

NCIGF CEO ELECTED CHAIR OF GLOBAL POLICYHOLDER PROTECTION GROUP

Robin Webb Leave a comment

INDIANAPOLIS, IN, January 14, 2019 – Roger H. Schmelzer, president of the National Conference of Insurance Guaranty Funds (NCIGF), has been selected to serve as chairman of the International Forum of Insurance Guarantee Schemes (IFIGS). 

Schmelzer, along with Peter Gallanis, president of the National Organization of Life and Health Insurance Guaranty Associations (NOLHGA), NCIGF’s life and health counterpart, together have represented the United States as members of IFIGS since 2012.

Schmelzer, who has led the NCIGF since 2006, will be joined on the IFIGS Management and Support Committees by representatives from Canada, Chinese Taipei, Germany, Greece, Korea, Kenya, Romania, Singapore, Spain, Thailand and the United Kingdom.  He has served as IFIGS secretary for the past year.

“Insurance customers, industry and the economy are best-served when the insurance promise is secured,” said Schmelzer upon his election. “I’m enthusiastic about working with our global partners to further advance that objective.”

IFIGS facilitates and promotes international cooperation between insurance guarantee schemes and other stakeholder organizations with an interest in policyholder protection. The IFIGS is made up of 25 full and associate members, 22 of which are Insurance Guarantee Schemes (IGS) from Africa, Asia, Europe and North America. There are more than 30 IGS worldwide.

IGS protect policyholders of insurance companies that fail. Many IGS provide expertise in stabilization or restructuring resolutions, and all IGS can provide expertise and some form of insurance protection and/or financial support to assist in the liquidation of an insolvent insurer.

An international platform will elevate the U.S. guaranty system’s value to domestic solvency regulators, according to Schmelzer. “This is timely because the NAIC is undertaking its own initiatives that could affect the U.S. system,” he said.  “The broader our expertise, the more impactful we can be on behalf of the state guaranty funds, the carriers who belong to the state associations and most importantly to individual policyholders and claimants.”

Schmelzer noted the efforts of the NCIGF and NOLHGA as part of IFIGS have already made a difference, citing recent changes to international regulatory drafts which underscore the primacy of policyholder protection, the importance of pre-insolvency cooperation, collaboration between the guaranty system and regulators as well as clearing up any misconceptions that a guaranty association could spread financial risk.

NCIGF and NOLHGA will host the IFIGS annual conference in late 2019.