Insurance regulations can influence the results of a business to the point of either facilitating an endeavor or making it hardly viable. Traditionally, insurers and reinsurers dealt with Latin American regulators on a one-on-one basis. That is still the case as a general rule, but in more recent times steps have been taken towards regional integration.
In 2009, the Latin American Association of Supervisors Corporation (the Spanish acronym is “ASSAL”) was officially formed as an international entity grouping the insurance supervising authorities of 19 Latin American countries, plus Spain and Portugal. The ASSAL initiative is not a novel idea. The National Association of Insurance Commissioners (“NAIC”) is a domestic institution of similar nature formed in the United States in 1871. The NAIC is the mechanism through which standards and best practices are set, peer reviews are conducted, and regulatory oversight is coordinated. Similarly, the International Association of Insurance Supervisors (“IAIS), established in 1994, is an international entity of insurance regulatory authorities from 200 international jurisdictions, including the NAIC and 56 jurisdictions in the United States, and several Latin American countries.
ASSAL set the following objectives:
- Exchange of information on legislation, control methods, market characteristics and operating systems in each of the countries in matters of insurance and reinsurance.
- Collect and disseminate technical and statistical information.
- Promote cooperation activities.
- Analyze the development of reinsurance in the region.
- Encourage regional programs in the fields of insurance and reinsurance education.
- Harmonize supervision policies and mechanisms.
- Convey experiences in the member countries regarding specific issues of the insurance industry.
ASSAL has also taken steps towards setting common standards for supervising local entities. It is also openly sharing a database containing information pertaining to member states and has facilitated the formation of work groups to study various aspects of the insurance business in member states -including technical aspects of the insurance business in Latin America. ASSAL has tackled issues such as general criteria for granting insurance licenses, money laundering, solvency margins and administration of assets/investments producing documents with guidelines. These documents clearly stipulate that they are for use as a reference to be applied “flexibly, following the legal framework and particular circumstances of each country.”
In September 2011, ASSAL also composed a “Multilateral Memorandum of Understanding on Cooperation and Exchange of Information” relating to sharing information between member States on transnational issues. Members can make specific inquiries to other members relating to insurers as well as other entities subject to the authority of insurance regulators, such as reinsurers, agents and - arguably, though not specifically mentioned - adjusters.
One of the effects of globalization and trans-border business is the convergence of multi-jurisdictional rules. In insurance, like other industries, the trends indicate a movement toward unification of rules and standardization of oversight. ASSAL is a prime example of this movement. The creation of these entities opens a world of information to its members that was previously more veiled. Members can now access information relating to international insurers, reinsurers and regulated insurance suppliers outside of their jurisdictions. A consequence of this influx of access to information is that players in the region can be more thoroughly scrutinized than before. However, there is also the advantage for those insurance/reinsurance entities that are compliant with local regulations, which is the fact that the transparency and consistency of this information help to avoid sanctionable actions.
So, while strictly speaking the relationship between an insurance entity or provider is still “one-on-one” with local supervising authorities, that relationship is now influenced by regional criteria and founded to some extent on regional performance. This is yet another aspect where the nature of the insurance business in Latin America is shifting, but still in transition. Hence, understanding the interplay of these changes in context is a key element to conducting business in this region.
Posted by Daniel Baron*
*Not licensed to practice law in Florida