Dissenting View of Birny Birnbaum 

FACI International Subcommittee Recommendations 

February 16, 2021 

I respectfully dissent from the recommendations by the International Subcommittee to 

FACI on 

 the proposed recommendation on data flows in trade agreement; and 

 the recommendations regarding FIO’s Request for Insurance regarding FIO’s study of 

the international insurance capital standards. 

Data Flow Recommendation 

My concern with the recommendation is how the language of the recommendation will 

be interpreted in light section 3 of the white paper supporting the barriers to trade 

recommendation – specifically the Data/IT Localization and Digital Protectionism section of 

the white paper. The purpose of the white paper is to provide the substantive discussion 

supporting the recommendations. In my view, the section 3 discussion presents reasonable 

consumer data privacy protection as onerous and unwarranted. 

I can support the proposed data flow recommendation if the white paper discussion is 

substantially revised. If the white paper section is not revised, then I oppose the proposed 

recommendation because it falsely suggests reasonable consumer data privacy protections are 

onerous and a barrier to trade. 

For example, "(The EU) General Data Protection Regime (GDPR) restricts (sic) imposes 

onerous restrictions on the movement of EU citizens' data, including where data was collected 

outside of the EU." Similarly, the reasonable consumer protections in the Kenya Data Protection 

Act -- such as consent of a data subject as a condition for cross-border transfer -- is presented as 

a trade barrier. As pointed out in earlier correspondence, personal data protected in some 

jurisdictions, like the EU or Kenya, lose that protection once transferred to the U.S. 

Further, I don't agree with the proposition that data protection narrows the data pool for a 

particular jurisdiction. But, even if that were the case, it is unclear how such data pool narrowing 

places US insurers at a competitive disadvantage versus domestic insurers since the same 

potential pool of data is available to any competitor. 
CEJ Birnbaum Dissent from FACI International Subcommittee Recommendations 

February 16, 2021 

Page 2 

 

The requested edits to the white paper section include the following. Revise the 

introductory section as follows: 

U.S. insurers are may be required to follow regulations to physically house customer and 

company data in country, adhere to severe restrictions on data flows that serve no 

consumer protection or other public policy purpose, and establish data and call centers 

in country even in the presence of provisions that permit regulatory agencies to quickly 

access an insurer's data for legitimate regulatory purposes. 

• Data and IT localization restrictions that serve no consumer protection or other public 

policy purpose are a critical non-tariff barrier to trade in the insurance sector and may 

confer an advantage to domestic competitors: 

For U.S. insurers, Tthe mandate for data centers in country adds layers of cost for 

hardware and maintenance, increases the complexity of global information technology 

systems, and impairs overall resilience, cybersecurity and risk management practices. 

[Digital protectionism narrows the data pool – placing U.S. insurers at a competitive 

disadvantage in the use of data for predictive modeling, predictive analytics, claims 

processing, fraud detection, pricing and risk selection.] 

Delete the examples for Kenya, the EU and Switzerland -- these incorrectly conflate 

reasonable consumer protection with onerous restrictions. 

Consider removing Malaysia since the description seems to say the problem has been 

resolved. 

Consider revising the Thailand description to distinguish that jurisdiction's demand for 

confidential information from the provisions in the USMCA that permit financial 

regulators to demand confidential information. Otherwise, delete this example. 

Perspectives on the FIO RFI for Study of the ICS 

The bulk of the subcommittee’s perspectives paper provides suggestions for issues and 

methods for the FIO study. I agree with those portions. It is the portions of the perspectives 

paper in which the “subcommittee agrees” with conclusory statements by other stakeholders 

with which I disagree. I disagree with the first two bullet points because they assume the 

outcome of the study instead of presenting the issues as items to be analyzed. 
CEJ Birnbaum Dissent from FACI International Subcommittee Recommendations 

February 16, 2021 

Page 3 

 

The first bullet is that the subcommittee agrees with respondents to the RFI who claimed 

that "Implementation of the Market Adjusted Valuation (MAV) ICS would be detrimental for 

long-duration life insurance products and related long-term investment." 

I don't believe such a conclusory statement is helpful for framing the FIO study. First, I 

don't agree with this statement as written. There are far too many examples of long-duration life 

insurance products which have failed to perform as expected, including, for example, long term 

care insurance, universal life and indexed universal life products. If a different capital standard 

had been in place that prevented the performance problems of these products -- and resulting 

retirement insecurity for consumers -- then the net impact of any reduction in availability of such 

long-term products as a result of said capital standard (if, in fact, that was a result) may be offset 

by improvements in consumer protection and product performance. 

My purpose is not to agree or disagree with the statement in the draft subcommittee 

report, but to suggest that the issue should be framed as: 

"Whether implementation of the MAV ICS would be detrimental for long-duration life 

insurance products and related long-term investment and, if so, whether such outcomes 

are offset by improved consumer protection and product performance." 

Similarly, for the second bullet, I suggest the issue be framed as a topic for research and 

not as a conclusion: 

"Whether Implementation of the MAV ICS would entail significant costs without 

commensurate benefits. Such costs might include development and maintenance of 

systems, processes, expertise, and educating external consumers of capital measures (i.e., 

regulators, investors, and other stakeholders), among others. Such benefits might include 

fewer product failures, simpler products and improved consumer confidence in insurance 

products, among others. 

For the third point, I suggest the statement requires both context and framing as an issued 

to be studied, 

"How the MAV ICS and AM operate over time -- covering periods sufficient to capture 

economic cycles and catastrophic financial events -- and how the performance over time 

affects the performance of each capital standard individually, relative to one another and 

relative to the ability of insurers to reliably provide long-duration products with and 

without guarantees." 
CEJ Birnbaum Dissent from FACI International Subcommittee Recommendations 

February 16, 2021 

Page 4 

For the fourth point, I again suggest framing the statement as an issue to be studied, 

"Whether the MAV ICS may be applied in a manner by one jurisdiction that usurps 

another jurisdiction's determination of the appropriate capital standard. For example, the 

MAV ICS is being developed as a world-wide group capital regime. To the extent it is

implemented in a foreign jurisdiction, is guidance needed to ensure a foreign supervisor 

will not apply it to operations of a U.S. insurer they do not regulate (i.e., apply 

the framework extraterritorially at the worldwide parent level of the U.S. insurance 

group)? Is securing the IAIS’ recognition of the Aggregation Method (AM) as 

comparable to the MAV ICS necessary to avoid such misapplication?"