NAIC chief optimistic on US equivalence with Solvency II

Work plan being developed with NAIC as European regulators seek 'different approach' to equivalence

The chief executive of the National Association of Insurance Commissioners (NAIC) has expressed optimism that a solution can be found to the issue of the equivalence of the US with Europe's Solvency II regime.

The comments from the US regulatory body came as work begins with European regulators on defining a plan for achieving equivalence by the US, which has to date been a challenging issue. It follows a statement from the European Commission that a "different approach" was needed for assessing the equivalence of the US regulatory regime with Solvency II.

Terri Vaughan, chief executive of the NAIC, says: "I continue to have a lot of confidence that we – the US and Europe – will find a way through this [issue of equivalence]. Our markets are too important and too intertwined for us not to."

Vaughan says discussions on developing a work plan for achieving US equivalence are at an initial stage. "We did meet to talk about a work plan and we will have further meetings. We will have a process for pursuing that work plan, but it is still in the early stages," she says.

The comments from the NAIC are an indication of progress in discussion between the US and Europe on regulatory equivalence, which has hitherto presented a difficult challenge for both parties.

The US has to date remained ambivalent towards the Solvency II regime, with the NAIC stating it would require a ‘principles-based approach' to equivalence that would recognise its individual regime.

Despite recent developments in the US insurance regime, such as the Solvency Modernisation Initiative, a number of issues have been seen as a potential barrier to the US being viewed as equivalent to Solvency II.

Earlier this month, the European Commission published the names of seven countries that would be considered for Solvency II equivalence – including South Africa and Australia. While the US was not included on the list, the commission acknowledged that a "different approach" was needed for to assess its equivalence.