While keeping a keen eye on the insurance industry in his home state, Virginia Insurance Commissioner Al Gross also has his sights honed on the global marketplace as well.

Alfred W. Gross

Gross, who has headed Virginia’s Bureau of Insurance for 13 years, also chairs the technical committee of the International Association of Insurance Supervisors as well as the Solvency Modernization Initiative task force for the National Association of Insurance Commissioners. He also serves on the NAIC’s International Solvency and Accounting working group and its International Insurance Relations Leadership Group.

With a background in finance, Gross said state regulators need to be aware of lessons learned from the current financial crisis and areas of financial regulation that need to be modernized with a global outlook.

“The NAIC started modernization initiatives years ago, but the pressures are growing to modernize to work more quickly, to deal with global developments, developments in regulatory methodologies, risk management techniques and improvements, so that we have not only an effective system of regulation, but an efficient one that is not too burdensome for the industry,” he recently told IFAwebnews.com.

As part of the work of the Solvency Modernization Initiative, one of the tasks for Gross and other commissioners is to compare the United States’ solvency system to Solvency II, the new regulatory system designed to provide a principles-based framework of supervision for insurers and reinsurers in Europe.

Solvency II is scheduled for implementation in 2012, having undergone an extensive development process abroad.

Gross said that the key is that while the U.S. and Europe have different regulatory systems, they can learn from one another.

The commissioner noted Europe’s work on internal models and company-specific capital requirements as areas where U.S. regulators can learn and which can help ensure that an insurer’s particular risk exposures are adequately addressed.

“Europe has chosen to break with Solvency I tradition, and developed an entirely new system,” he said.  “In the U.S., we have a tested system that has worked well, but may need some modernization to keep up with developments in regulatory techniques and in the marketplace.  Europe has an untested system.  We can mutually benefit from each other’s experience, and that is important.”

This story originally appeared in the October 2009 print edition of Insurance & Financial Advisor.