Council Hails Progress on International Markets

The Council of Insurance Agents & Brokers told the International Trade Commission (ITC) today that great progress has been made in opening foreign markets to U.S. insurance intermediaries, but barriers still exist that impede their ability to provide services and products needed by clients around the world.

At a hearing before the ITC, Michael Moran, executive vice president of Aon Risk Services, testified on behalf of The Council. He said the emergence of a strong distribution network will drive the development of the insurance industry in China, India and the Middle East and will help those countries and regions realize the benefits of a strong insurance market.

“A strong insurance market efficiently transfers risk as well as facilitates asset accumulation, resource and infrastructure development,” Moran said.

The hearing was held in response to a request by U.S. Trade Representative Susan C. Schwab that the ITC investigate and prepare a report on the operations of certain foreign markets relating to property/casualty insurance services. In a June 9 letter, Schwab asked the ITC to examine factors affecting supply and demand in these markets; the nature and extent of cross-border trade and affiliate sales in the global market for p/c insurance; and policies and practices that affect U.S. firms’ access to, and competitiveness in, foreign markets.

Moran said despite gains, barriers to U.S. intermediaries remain. For example, he said, some countries still restrict foreign ownership. India currently allows foreign brokers to own only 26 percent of a brokerage in the country.

In China, local brokers are held to a lower standard of corporate governance than foreign firms, and local companies are audited less stringently than foreign companies. Moran said that often leads to local companies acting in ways that don’t reflect well on the industry and puts foreign firms at a competitive disadvantage.

The Council supports efforts to harmonize treatment of local and foreign brokers. Although opening markets to foreign entities is a priority, The Council said it is critical that the regulations promote a competitive market and that regulations be transparent and applied evenly across the marketplace, promoting the role of brokers and ensuring professional standards.

The Council also stressed the importance of being able to place master policies for clients with international risks in multi-jurisdictions. Many countries restrict cross-border placement by requiring the risk to be covered by local carriers, which defeats the purpose of global policies, particularly if the local market is limited in coverages it can handle.