AIG 2013 Annual Report Download - page 46

(FSAP) reviews conducted by the World Bank and the International Monetary Fund and the reports thereon spur the
development of country-specific additional or amended regulatory changes. Lawmakers and regulatory authorities in
a number of jurisdictions in which our subsidiaries conduct business have already begun implementing legislative and
regulatory changes consistent with these recommendations, including proposals governing consolidated regulation of
insurance holding companies by the Financial Services Agency in Japan, financial and banking regulation adopted in
France and compensation regulations proposed or adopted by the financial regulators in Germany and the United
Kingdom Prudential Regulation Authority.
The FSB has also charged the IAIS with developing a template for measuring systemic risks posed by insurer
groups. The IAIS has requested data from selected insurers around the world to determine which elements of the
insurance sector, if any, could materially and adversely impact other parts of the global financial services sector
(e.g., commercial and investment banking, securities trading, etc.). The IAIS has provided its assessment template to
the FSB. Based on this assessment template, on July 18, 2013, the FSB, in consultation with the IAIS and national
authorities, identified an initial list of G-SIIs, which includes AIG. The IAIS intends G-SIIs to be subject to a policy
framework that includes recovery and resolution planning requirements, enhanced group-wide supervision, basic
capital requirements and higher loss absorbency (HLA) capital requirements. The IAIS is currently developing a basic
capital requirement (BCR), which it expects to finalize by the end of 2014. The BCR is expected to cover all group
activities and could be implemented by national authorities as soon as 2015. The BCR will also serve as a
foundation for the application of HLA capital requirements, which the IAIS intends to focus on non-traditional and
non-insurance activities. It is expected that the IAIS will develop HLA capital requirements by the end of 2015 and
the G-SII policy framework will be fully implemented by 2019.
The IAIS is also developing a 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. As currently
delineated under the ComFrame, AIG meets the parameters set forth to define an IAIG. While we currently do not
know when any ComFrame requirements will be finalized and become effective, the IAIS will undertake a field testing
of the ComFrame, including the possibility of additional capital requirements for IAIGs, which is expected to
commence in the beginning of 2014. It is expected that implementation of the ComFrame would begin in 2019.
Legislation in the European Union could also affect our international insurance operations. The Solvency II Directive
(2009/138/EEC) (Solvency II), which was adopted on November 25, 2009 and is expected to become effective in
2016, reforms the insurance industry’s solvency framework, including minimum capital and solvency requirements,
governance requirements, risk management and public reporting standards. Solvency II is expected to be
accompanied by Omnibus II, an EU proposal for a directive that also contains provisions for the capital treatment of
products with long-term guarantees. Additionally, the European Insurance and Occupational Pensions Authority
recently introduced interim guidelines effective January 1, 2014 that provide regulators in EU Member States with a
framework to ensure that insurers make demonstrable progress towards meeting Solvency II requirements in 2016.
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, along with other U.S.-based insurance
companies, could be required to be supervised under Solvency II standards. Whether the U.S. insurance regulatory
regime will be deemed ‘‘equivalent’’ is still under consideration by European authorities and remains uncertain, so we
are not currently able to predict the impact of Solvency II.
We expect that the regulations applicable to us and our regulated entities will continue to evolve for the foreseeable
future.
Certain states and other jurisdictions require registration and periodic reporting by insurance companies that are
licensed in such jurisdictions and are controlled by other corporations. Applicable legislation typically requires periodic
disclosure concerning the corporation that controls the registered insurer and the other companies in the holding
company system and prior approval of intercompany services and transfers of assets, including in some instances
payment of dividends by the insurance subsidiary, within the holding company system. Our subsidiaries are
registered under such legislation in those jurisdictions that have such requirements.
Our insurance subsidiaries are subject to regulation and supervision by the states and by other jurisdictions in which
they do business. Within the United States, the method of such regulation varies but generally has its source in
Regulation of Insurance Subsidiaries
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AIG 2013 Form 10-K28
ITEM 1 / BUSINESS
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