AIG 2013 Annual Report Download - page 42

U.S. State Regulation
State Insurance Regulators: Our insurance subsidiaries are subject to regulation and supervision by the states
and other jurisdictions in which they do business. Regulation is generally derived from statutes that delegate
supervisory and regulatory powers to a state insurance regulator, and primarily relates to the insurer’s financial
condition, corporate conduct and market conduct activities.
NAIC Standards: The National Association of Insurance Commissioners (NAIC) is a standard-setting and
regulatory support organization created and governed by the chief insurance regulators from the 50 states, the
District of Columbia and five U.S. territories. The NAIC itself is not a regulator, but through the NAIC, state
insurance regulators establish standards and best practices, conduct peer review and coordinate regulatory
oversight.
Foreign Regulation
Financial Stability Board (FSB): Consists of representatives of national financial authorities of the G20 nations.
The FSB itself is not a regulator, but it coordinates the work of national financial authorities and international
standard-setting bodies and develops and promotes implementation of regulatory, supervisory and other financial
policies.
International Association of Insurance Supervisors (IAIS): Represents insurance regulators and supervisors of
more than 200 jurisdictions in nearly 140 countries and seeks to promote globally consistent insurance industry
supervision. The IAIS itself is not a regulator, but the FSB has directed the IAIS to create standards on issues
such as financial group supervision, capital and solvency standards, systemic economic risk and corporate
governance and incorporate them into IAIS’ Insurance Core Principles (ICPs). The FSB also charged IAIS with
developing a template for measuring systemic risks posed by insurer groups. Based on IAIS’ assessment
template, the FSB identified AIG as a global systemically important insurer (G-SII), which may subject us to a
policy framework that includes recovery and resolution planning requirements, enhanced group-wide supervision,
basic capital requirements and higher loss absorbency capital requirements. The IAIS is also developing
ComFrame, a Common Framework for the Supervision of Internationally Active Insurance Groups (IAIGs), which
includes additional supervisory oversight based on its ICPs but also adds requirements and supervisory processes
pertaining to the international business activities of IAIGs. AIG currently meets the parameters set forth to define
an IAIG.
European Union (EU): Certain financial services firms with regulated entities in the EU, such as us, are subject to
supplementary supervision, which seeks to enable supervisors to perform consolidated banking supervision and
insurance group supervision at the level of the ultimate parent entity. The objective of supplementary supervision
is to detect, monitor, manage and control group risks. The UK Prudential Regulatory Authority, the United
Kingdom’s prudential regulator, is our EU supervisory coordinator. The EU has also established a set of regulatory
requirements for EU derivatives activities under the European Market Infrastructure Regulation (EMIR) that
include, among other things, risk mitigation, risk management and regulatory reporting, which are effective, and
clearing requirements expected to become effective in 2014.
The EU’s Solvency II Directive (2009/138/EEC) (Solvency II), which is expected to become effective in 2016,
includes minimum capital and solvency requirements, governance requirements, risk management and public
reporting standards. The impact on us will depend on whether the U.S. insurance regulatory regime is deemed
‘‘equivalent’’ to Solvency II; if the U.S. insurance regulatory regime is not equivalent, then we could be subjected
to Solvency II standards.
Regulation of Foreign Insurance Company Subsidiaries: Generally, our subsidiaries operating in foreign
jurisdictions must satisfy local regulatory requirements. Our foreign operations are also regulated in various
jurisdictions with respect to currency, policy language and terms, advertising, amount and type of security
deposits, amount and type of reserves, amount and type of capital to be held, amount and type of local
investment and the share of profits to be returned to policyholders on participating policies. Some foreign countries
also regulate rates on various types of policies.
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AIG 2013 Form 10-K24
ITEM 1 / BUSINESS
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