In a statement last week, Therese Vaughn, Chief Executive Officer of the National Association of Insurance Commissioners (the NAIC”), stated that the state-based regulatory system in the United States should be deemed equivalent to the Europe Union’s Solvency II regulatory process. According to Vaughn, while the United States will not have a single set of rules like the European Union, the state-based works and has been tested by the recent financial crisis. Currently the NAIC's Solvency Modernization Initiative ("SMI") is performing a critical self-examination of the United States’ insurance solvency regulation framework. SMI will inform state insurance regulators on how insurers should disclose risks in light of international developments in insurance supervision, banking supervision, and international accounting standards.
Effective in 2013, Solvency II is the European Union’s uniform standard for insurers and reinsurers. Under Solvency II, any foreign firms operating within the European Union must be regulated by a “functional equivalent” regulator in order to receive similar treatment as domestics. Without equivalence, U.S. insurers doing business in the European Union may face certain barriers to entry.