The Modernization of Insurance Company Solvency Regulation in the U.S.: Issues and Implications

Networks Financial Institute Policy Brief No. 2012-PB-01

59 Pages Posted: 23 Mar 2012

Date Written: March 21, 2012


Since its inception in mid-1800s, insurance regulation in the U.S. has continued to evolve in response to changing circumstances and the opportunity to take advantage of new methods and technologies. Important developments in insurance regulatory policies and practices at an international level, including Solvency II, as well as the recent financial crisis, have caused U.S. regulators to reconsider their current system of solvency supervision of insurance companies. This reconsideration is embodied in the NAIC’s Solvency Modernization Initiative (SMI) which, arguably, is the most significant program of regulatory reform in the U.S. that has been attempted since the early 1990s. The establishment of the Federal Insurance Office (FIO) by the Dodd-Frank Act in 2010 has added further impetus to the NAIC’s efforts as the FIO has been charged with recommending reforms to the U.S. insurance regulatory system as well as representing the U.S. in international negotiations on insurance regulatory matters. This paper evaluates the five principal components of the NAIC’s SMI: 1) capital requirements; 2) governance and risk management; 3) group supervision; 4) statutory accounting and financial reporting; and 5) reinsurance. It also examines the NAIC’s risk-focused surveillance framework in addition to other aspects of the modernization of insurance regulations. Key issues arising from the effort to modernize insurance regulation are explored as well as its implications for regulators, insurance companies and other stakeholders.

Keywords: Insurance Regulation, Solvency, Solvency Modernization Initiative, Solvency II, Federal Insurance Office

Suggested Citation

Klein, Robert Warren, The Modernization of Insurance Company Solvency Regulation in the U.S.: Issues and Implications (March 21, 2012). Networks Financial Institute Policy Brief No. 2012-PB-01, Available at SSRN:

Robert Warren Klein (Contact Author)

Georgia State University ( email )

5387 Northchester Ct
Atlanta, GA GA 30338
United States
404-386-1591 (Phone)

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