Financial Stability Board launches consultation on key attributes of ‘too big to fail’ insurers

The Switzerland-based Financial Stability Board (FSB) is exploring the application of the key attributes of effective resolution regimes for financial institutions to non-bank financial institutions, including insurance companies, and on principles governing information sharing for resolution purposes.

The FSB announced in a statement Aug. 12 that it has launched a public consultation to consider the issues.

FSB reports the key attributes – which set out the core elements considered necessary to make feasible the resolution of financial institutions without severe systemic disruption and without exposing taxpayers to loss – are a central component of board policy measures endorsed by G20 leaders to address the “too big to fail” problem associated with systemically important financial institutions.

They constitute an “umbrella” standard that applies for all parts of the financial sector that could cause systemic problems, the FSB statement adds.

Annexes to the key attributes have been developed that set out guidance on resolution of financial market infrastructure (FMI) and resolution of systemically important FMI participants; resolution of insurers; and client asset protection in resolution. The proposed guidance is meant to help jurisdictions and authorities implement the key attributes with respect to resolution regimes for FMIs, insurers and firms with holdings of client assets, the FSB reports.

The proposed guidance accompanies the consultative report on FMI recovery published by the Committee on Payment and Settlement Systems (CPSS) and the International Organization of Securities Commissions (IOSCO) earlier this week to provide a comprehensive set of guidance on recovery and resolution for different kinds of systemically important FMI, the board statement notes.

The guidance on resolution of insurers complements the policy measures for global systemically important insurers published by the International Association of Insurance Supervisors (IAIS) on July 18.

“Today’s publication of draft guidance on the resolution of non-bank financial institutions represents further significant progress in international efforts to develop the powers and tools that authorities need to manage the failure of any type of systemic institution without taxpayers bearing the costs,” FSB chair Mark Carney says in the statement. “Resolution of firms from other financial sectors has lagged behind the progress made in relation to banks,” Carney adds.

A list of global systemically important financial institutions (G-SIFIs) was first published in November 2011 and updated in 2012 to contain 28 institutions (all banking groups). In July 2013, an initial list of nine global systemically important insurers was published, namely Allianz SE, American International Group, Inc., Assicurazioni Generali S.p.A., Aviva plc, Axa S.A., MetLife, Inc., Ping An Insurance (Group) Company of China, Ltd., Prudential Financial, Inc. and Prudential plc. The list is to be updated each November, beginning in 2014.

“Since the financial crisis, supervisors across the sector have worked diligently to address risks to the global financial system from systemically important financial institutions or SIFIs and macroprudential shocks,” Peter Braumüller, chair of the IAIS executive committee, said at the time. The measures and framework “complete a major piece of this reform in a manner specifically designed for the insurance sector,” Braumüller added.

The FSB welcomes comments and responses to the questions raised in the consultative document, sent to fsb@bis.org, by Oct. 15, 2013. Responses will be published on the FSB website unless respondents expressly request otherwise.