Regulatory Modernization: Capitalizing On Global Growth
Remarks by Sean Kevelighan
Head of Group Public Affairs, Zurich
Thank you, Johanna. I’m pleased to be here again today with the National Journal, as well as my colleagues from across the insurance industry.
The timing of this event has turned out to be quite serendipitous, with both Senate and House insurance hearings being held this week on this very topic.
It’s also an honor to follow the remarks of Chairman Shelby and Representative Cleaver this afternoon. On behalf of Zurich, I commend their leadership in continuing to be such active participants in this ongoing conversation surrounding the future of insurance. They are a vital part of this collaborative process.
As much as this event focuses on the future of insurance, it is important to also briefly consider the past in terms of the foundation it has laid for our current state of affairs.
Throughout the financial crisis, insurance proved itself again and again to be a deeply-rooted source of strength in our financial system.
The source of stability rendered from the basic business model of insurance – long-term asset management in order to pay policyholder claims.
So as we begin to look forward, it is important to understand that the idea behind today’s push for regulatory modernization and the adoption of a global insurance capital standard is not about the crisis.
Rather, today’s conversation is about looking ahead to the future and establishing a solvency regime that best enables insurers to continue to support global economic growth.
The fact is, even if the financial crisis never happened, we would still be here today arguing that we must seize this opportunity to reform our regulatory system so that global insurers can better facilitate economic growth going forward.
In that spirit, today’s discussion can help us answer the question, “How can international regulatory reform serve as a vehicle for future growth?” Globalization has brought many benefits to economies around the world. Whether you are doing commercial business, or are a personal consumer of goods and services, it is hard not to appreciate the tremendous impact of what’s become a global economy.
At the same time, as markets change, regulatory frameworks must adapt so that we – as a global community – can reap all of the benefits of the talent, innovation, and drive of people across the world.
For global insurers, our role is to help people deal with and manage the risks that come with a more connected world.
Today, whether it’s a volcano eruption in Iceland, a tsunami in Japan, or a drought in the western United States, there’s no way to avoid the economic impacts that ripple throughout communities around the world.
Insurers have long used the law of large numbers to mitigate risk—the larger and more diversified the sample, the more likely actual losses mirror expected losses. By being better positioned to manage risks around the globe, internationally active insurers increase stability, supporting businesses of all sizes.
Yet, global regulatory fragmentation unnecessarily raises the costs of doing business and adds complexity for insurers as well as our customers. Further, by trapping capital, we turn the law of large numbers into the law of kind-of large numbers.
Brass tacks – global regulatory fragmentation impacts our ability to serve customers, which include everyday U.S. brand names like Ford, McDonalds, Marriot, and Apple.
As such an important market player in the global economy, we truly hope that U.S. policy makers will look at international capital standard as a catalyst for growth and economic expansion.
In having a collective voice and seat at the table, there is much more potential to drive home the important values of the U.S. market and regulatory system.
In closing, I’d like to quickly address a few misconceptions in this debate.
First of all — the goal of international regulatory modernization has never been to increase capital requirements, but rather to move towards global alignment.
Additionally, a new capital framework is not an effort to displace policyholder protection. Nor is it a vehicle to eradicate state regulation of insurance. Zurich has been present in the U.S. for over 100 years and expects to be here for the next 100. We have witnessed firsthand the important role that the state system plays through periods of economic growth and decline.
And lastly—we firmly believe that an international capital standard shouldn’t necessarily apply to all insurers. Indeed the criteria under consideration by the International Association of Insurance Supervisors makes clear that such a standard might apply to approximately 50 insurance groups located around the world, of which only a small subset are U.S. groups.
Here in 2015, there is a real opportunity to change the way we think about insurance in the realm of the global arena. The future is upon us. Let’s not dwell any longer on the past.
I thank the panelists in advance for providing us with what I know will be an informative and well-rounded discussion on how we can keep this debate propelling to the future.