Regulatory mix and match.

The flurry of legislation proposed or adopted by the European Union in the past few years has caused insurers to take notice, voicing support and caution. The new laws shift more of the regulatory processes to the European Union and therefore offer a greater opportunity for homogeneity. The risk we face is that the homogeneous structure will not be as good as what some of the individual countries have," said Ernst Csiszar, president and chief executive officer of the Property Casualty Insurers Association of America.

For example, the United Kingdom has a principles-based approach to regulation. "The E.U. is not quite taking that approach," Csiszar said. "Their regulatory process is more like us--regulation upon regulation, rather than a principles approach."

Our cover story this month, "A New World Order" on page 28, takes a Big Picture look at the E.U. initiatives, including the Reinsurance Directive, the 8th Company Law Directive and Solvency II, as well as recent U.S. laws and proposals, such as the Sarbanes-Oxley Act and the SMART Act, exploring how the new laws may affect the other jurisdiction.

"There will be pressure on out trade negotiators to look at how we're being regulated because of the E.U. regulations," Csiszar said. "We must make the operational side of out business less of the trade barrier we are perceived to be."

The European Union may be able to establish common regulations among its member countries, because it does thing by edicts, but enforcement will be a problem, Csiszar said. And the problem will be exacerbated when the European Union expands. "There are enormous differences between the old and new members," he said. "If they want homogeneity, they'll have to accept the regulatory processes in these new entrants."

"We have a good dialogue to understand how each other's system works--formal and informal dialogue between E.U. and U.S. regulators," Csiszar said. "Being able to work together has more to do with that than with having similar laws."

Sally Whitney is editor. You may reach her at (908) 4392200, Ext. 5340, by writing to A.M. Best Co., Ambest Road, Oldwick, NJ 08858, or by e-mail at [e-mail]. The e-mail address for Best's Review is [e-mail].