The new system, Mr. Van Hulle said, will put more responsibility on regulators but will allow businesses to better identify risks and develop internal modeling to assess risk. Insurance supervisors need to learn to talk along those lines, he added.

Alberto Corinti, secretary general of the Committee of European Insurance and Occupational Pensions Supervisors, Frankfort, Germany, said one of the main issues of the second pillar of the solvency project will be to create a strong supervisory review process.

The NAIC is currently working on its own solvency regulations as regulators, insurers and actuaries attempt to create a principles-based reserving system.

Doug Stolte, a Virginia regulator who is part of an NAIC solvency working group, noted that governance continues to be a major issue with which regulators and industry grapple. He noted the reluctance of nonpublic mutual companies to support stronger internal controls for financial reporting as regulators attempt to advance changes to the NAIC's Model Audit Rule.

Douglas Barnert, executive director of the Group of North American Insurance Enterprises, New York, a combine of 10 major property-casualty, life and reinsurance concerns that aims to influence international accounting standards, said that regulators with many NAIC working groups should be discussing the changes going on in the European insurance market

GNAIE aims to increase communication between insurers doing business in North America and the International Accounting Standards Board (IASB) and the U.S Financial Accounting Standards Board.

The principles-based project in the United States was formed, Mr. Barnert said, because of difficulties caused by the fact that new product introductions make it necessary for regulators to revisit regulations and actuarial guidance already in place.

“It is a local reaction to a similar discussion that has been going on globally for a while,” he said.

European regulators have to achieve consistency on an approach for solvency from 25 countries, while the U.S. needs to gather consensus from 50 states, noted Mr. Barnert.

Once the NAIC's Interstate Compact is operational, it could conceivably be a way to achieve consistency in solvency standards, he added. More than 20 state legislatures have agreed to participate in the Compact, and the additional 6 states needed to make it operational could join by spring.

On the overseas regulatory front, NAIC's new president, Maine Superintendent Alessandro Iuppa, has said participation in international insurance regulation is one of his priorities during his term this year.

During the industry liaison session here with the NAIC, Steve Broadie, representing the Property Casualty Insurers Association of America, Des Plaines, Ill., commended the NAIC on its efforts to date and urged it to further those efforts by tapping the financial and actuarial talent in state insurance departments.

As international and U.S. accounting bodies reach consensus on global accounting standards and changes are made to U.S. GAAP reporting, it is likely there will be pressure to at least adopt pieces of those new standards to statutory accounting standards as well, Mr. Broadie explained.

Dave Snyder, a representative with the American Insurance Association, Washington, expressed “serious concerns” over the general direction of the European solvency efforts. “It is important for U.S. regulators and insurers to be major players on the field and not feel pressure from others that their way is the best way even if it is not,” he said.