October 10, 2013 by Canadian Underwriter
The International Association of Insurance Supervisors (IAIS) has announced its plan to develop a risk-based global insurance capital standard by 2016.
Full implementation of the new ICS will begin in 2019, with “testing and refinement with supervisors and internationally-active insurance groups,” prior, the IAIS said this week.
“It is undeniable that the business of insurance is global, and global issues demand global responses,” Peter Braumüller, chair of the IAIS executive committee noted in a statement.
“This is why the IAIS, whose members constitute nearly all of the world’s insurance supervisors, has committed to develop and implement the first-ever risk based global insurance capital standard.”
The announcement comes after the IAIS recently established the parameters for what would constitute global systemically important insurance institutions (GSII), resulting in the Financial Stability Board publishing a list of nine companies that initially quality. That list includes:
The IAIS has been developing a comprehensive framework (ComFrame) for the supervision of international insurance groups since 2010, and its draft phase is set to end in December.
This week’s announcement means that the ComFrame will include a risk-based global ICS, although it has always included a capital component within its solvency assessment, the IAIS noted.
Next year, the IAIS will also work on developing backstop capital requirements (BCRs), which are planned to be finalized and ready for implementation by the global systemically important insurers in late 2014.
Those BCRs will be the foundation for higher loss absorbency (HLA) requirements for those companies, and the IAIS anticipates their development will also “inform the development of the ICS.”
The overall timeline for the IAIS’ initiatives includes:
October through December 2013
2015 – 2016
“From the financial crisis, we learned that our global financial regulatory regime should be more robust and comprehensive in scope, and jurisdictions should share a commitment to global standards,” Michael T. McRaith, chair of the IAIS technical committee noted in the group’s statement.
“The IAIS – with its mission to promote effective and globally consistent supervision of the insurance industry and to contribute to global financial stability – has an essential role in fulfilling these objectives.”