Solvency Assessment for Insurance Groups in the United States and Europe : a Comparison of Regulatory Frameworks

As a reaction to the increasing trend of insurers forming and participating in financial conglomerates and insurance groups, insurance supervisory authorities are currently developing group-wide solvency regulations. The International Association of Insurance Supervisors (IAIS) recently published an issues paper that discusses the challenges to group supervision and defines criteria for a thorough group solvency framework. Based on these criteria, this article provides an overview and comparison of three important approaches - the U.S. solo plus approach of the National Association of Insurance Commissioners, Switzerland's group structure model, and the Solvency II proposal on group solvency assessment. The analysis reveals various deficits within the group regulation of the United States implying the need for future regulatory work. By contrast, the performance of the European frameworks with regard to the IAIS criteria is good. In particular, the Swiss framework can be seen as a prime example of an innovative and solid group solvency assessment.