PD-7 Reinsurance International Supervisory Developments CIA Seminar for theAppointed Actuary Sept. 17, 2009 David Oakden

Reinsurance IAIS Guidance Paper on Mutual Recognition Collateral Requirements –EU –Switzerland –US –Australia Part XIII –AAR Concerns –DCAT Concerns

Mutual Recognition Purpose Facilitate the international supply of reinsurance Foster efficient & effective international supervision

Mutual Recognition Benefits Encourages geographical diversification Reduce duplication of efforts by supervisors Facilitate market participation Enhance group supervision Better supervisory response to complexity of modern reinsurance market

Mutual Recognition Supervisory Considerations International assessments (IMF WB) Terms of MoUs Legal frameworks –Insolvency laws Technical competence Treatment of confidential information Transparency of regulatory system

European Union Single passport No collateral within EU Members can impose collateral for non- EU countries –e.g. France Reinsurers must be regulated in some EU countries –e.g. Germany

Switzerland No reciprocal rights with EU Most companies will use an EU subsidiary

USA / Reinsurance Regulatory Modernization Framework Reinsurance Supervision Review Department –Establish criteria for evaluation of regimes –Needs federal regulation Not expected soon Port of entry / Home state assigns a rating (1 strongest to 5 vulnerable) –Collateral depends on rating

USA / Reinsurance Regulatory Modernization Framework RatingNon-USUS 10% 210%0% 320%0% 475% 5100%

Australia New capital requirements for non-authorized reinsurance (2009) Factors apply on second annual balance sheet date after the event (see next slide) Unless supported by collateral Reinsurance must be subject to Australian Law Disputes must be heard in Australia More explicit consideration of reinsurance recoverable by AA Reinsurance risk management framework 100% capital change for recoverables past six months

Australia Rating Capital Factor 120% 240% 360% 4100% 5

Part XIII / Reserving Issues Business in Canada may change effective January 1, 2010 First quarter results (2010) will be based on change in reserves based on the new requirements Advisable to prepare two valuations –December 31, old –January 1, new Identify any data issues early

Part XIII / DCAT Issues 2010 Results will be based on the new definition of business in Canada DCAT reports prepared in 2009 must project 2010 on the new basis Registered reinsurance ceded from Branches needs to be checked –This applies to Canadian companies as well as branches

Questions