Insurance Holding Company Supervision

Insurance holding company supervision: hearing before the Subcommittee on Capital Markets, Insurance, and Government Sponsored Enterprises of the Committee on Financial Services, U.S. House of Representatives, One Hundred Eleventh Congress, second session, March 18, 2010.

Canada has a highly developed insurance market that is important to Canada's economy. Insurance penetration and density are as expected for an advanced economy like Canada. Canada is home to three large life-and-health (L and H) insurance conglomerates that are globally active, with only approximately a third of their business within Canada. In contrast to the L and H insurance industry, the property-and-casaulty (P and C) insurance industry is less concentrated, and foreign-owned insurance subsidiaries and branches have a significant market share. There are three mortgage insurers operating in Canada. The largest mortgage insurer is the Canada Mortgage and Housing Corporation (CMHC), which is a federal government agency that operates on a commercial basis; CMHC also has a separate social housing mandate. All mortgage insurers benefit from an explicit government guarantee; however, a deductible of 10 percent of the original principal amount of the insured mortgage applies to a lender's claim in respect to an insurance contract written by either of the two private mortgage insurers.

Since banking systems play a crucial role in maintaining the overall health of the economy, the adverse effects of poorly supervised systems may be quite severe. Without some form of vigilant external oversight, banking systems could fall prey to excessive risk taking, moral hazard, and corruption. Prudential supervision provides that oversight, using government regulation and monitoring to ensure the soundness of the banking system and, by extension, the economy at large. The contributors to this thoughtful volume examine the current state of prudential supervision, focusing on fundamental issues and key pragmatic concerns. Why is prudential supervision so important? What kinds of excess must it guard against? What particular forms does it take? Which of these are the most effective deterrents against mismanagement and system overload in today's rapidly shifting financial climate? The contributors foresee a continued movement beyond simple regulatory rules in banking and toward a more active evaluation and supervision of a bank's risk management practices.

The Belgian insurance industry was adversely affected by the global financial crisis and continued to confront challenges related to legacy assets and economic uncertainties in Europe. The Belgian authorities have made significant progress in updating the insurance regulatory regime and supervisory practice. The updated regulatory framework has a high level of observance with the Insurance Core Principles (ICPs), supported by robust prudential supervision. The authorities are advised to review current conduct-of-business (CoB) regulation and supervision to strengthen the protection for policyholders.