Lloyd's of London, a prominent insurance market, sees benefit from a proposed revamping of financial services regulation in the United States, Chief Executive Richard Ward said on Thursday.
"I think the ability of the United States to speak with one voice and to ensure uniform implementation of policy throughout the states is in the interest of both the United States and its trading partners," said Ward in an interview shortly after Lloyd's announced a 5 percent rise in 2007 profit to 3.85 billion pounds.
A broad blueprint for regulatory reform was put on the table recently by U.S. Treasury Secretary Henry Paulson.
For insurers, the Treasury's proposal would lead to the establishment of a federal insurance regulator to have oversight of insurers who chose an "optional federal charter."
Currently, the U.S. insurance industry is regulated on a state-by-state basis. Although state regulators are linked together under the National Association of Insurance Commissioners (NAIC), which has spearheaded some efforts to standardize some procedures, many differences between states still persist.
A regulatory revamp could also eliminate a hefty collateral requirement on foreign reinsurers. Reinsurers assume part of the risk in policies that insurers have already sold to corporations and individuals.
Under the current system, Lloyd's, as a non-U.S. company, is required to put up collateral for reinsurance business it does in the United States, a costly tie-up of capital, Ward said.
The 320-year old Lloyd's market counts on U.S. business for about 40 percent of its premium on an annual basis, he added.
"We have to hold significant funds in the United States as collateral, roughly $12 billion (6 billion pounds)," said Ward.
"Our view is, with an optional federal charter, and with a carve out of the international business from the NAIC, they would adopt a ratings assessment of insurance businesses rather than a zip code assessment, meaning that we would be treated no differently to a U.S. reinsurer."
Lloyd's currently has to put up collateral despite its strong "A" rating from Oldwick, New Jersey-based insurance rating agency A.M. Best, in contrast to U.S. companies.
It is not clear how quickly, or even if, the Treasury's extensive regulatory revamping will be put in place. Opponents, including state insurance regulators, argue the insurance measure could hurt consumers.
"Myself, my chairman (Peter Levene) and the general counsel (Sean McGovern), are regularly visiting the U.S. to discuss this issue," Ward told Reuters. "We will continue to have meetings (in Washington)."
