Toward Global Reinsurance Regulation

Significant progress and enhancements have been made in the reinsurance regulatory landscape during the past decade. This is illustrated by the introduction of the Reinsurance Directive in Europe and in North America with the recent NAIC (National Association of Insurance Commissioners) adoption of a long-controversial proposal for a new reinsurance regulatory framework. Historically, the manner and quality of reinsurance regulation has varied significantly among jurisdictions1—some jurisdictions regulate reinsurers directly,2 others apply a form of indirect regulation through the reinsurance transaction,3 and still others do not regulate reinsurance or reinsurers at all.4 However, the trend today is to strengthen regulatory requirements and to supervise reinsurers directly, not just through their counterparties. This evolution is a result of a number of factors, including the increased activity of the International Association of Insurance Supervisors (IAIS), the advent of Solvency II, the increased complexity and globalization of the (re)insurance industry, as well as the development of more sophisticated risk management techniques.