Preparing Comframe guidelines and insurance capital standards for IAIGs.
Development of ComFrame to enhance insurance regulation and supervision began in 2009. With on-going field testing having started in 2014, current plans are for implementation in early 2020.
While the International Core Principals (ICPs) apply to the supervision of all insurance entities, ComFrame is only applicable to those insurance groups identified as an Internationally Active Insurance Group (IAIG) by its national supervisor. The IAIS has indicated that there are approximately 50 global insurance groups classified as IAIGs.
An IAIG must meet these criteria:
ComFrame will enable supervisory cooperation and coordination and effective information sharing between supervisors, with the group-wide supervisor responsible for the supervision of the IAIG as a whole on a group-wide basis.
The group-wide supervisor will be able to exercise some “direct” powers at the level of the head of the insurance group, including:
Module 1: Scope of ComFrame
Elements 1 and 2 - IAIG definition and identification process
Element 3 - Scope of ComFrame supervision and process to determine entities to be covered
Modeule 2: Elements of IAIG Compliance
Element 1 - Legal and management structures, cross-border issues and complexities
Element 2 - Group-wide governance framework, including roles of the governing body and senior management of the head of the IAIG, senior management and key control functions
Element 3 - Enterprise risk management (ERM) requirements
Element 4 - Group-wide ERM policies required, including investment, underwriting, claims management, reinsurance strategy, insurance liability valuation and actuarial
Element 5 - Insurance capital standard (ICS)
Module 3: Supervisory Requirements
Element 1 - Group-wide supervisory process
Element 2 - Supervisory cooperation and interaction, including requirement for supervisory colleges
Element 3 - Crisis management and resolution
Source: IAIS Common Framework for the Supervision of Internationally Active Insurance Groups - Revised DRAFT September 2014
The IAIS released a set of high level principles in September 2014 to guide the development of the global Insurance Capital Standard (ICS). It is evident that further refinement will be made, dependent on the results of current and future field testing. For ICS purposes all G-SIIs are considered to be IAIGs.
Timeline and process:
The IAIS has reconfirmed its aim of convergence in global regulatory capital frameworks over time. An ICS Version 1.0 will be released in time for private reporting to supervisors from 2017. However, the version that will be used for public reporting (ICS Version 2.0) will not be adopted until the 2019 IAIS Annual General Meeting. The next public consultation document on the ICS is expected in June 2016.
The IAIS also recognizes the need for an implementation period after adoption, to enable jurisdictions to embed the ICS into local requirements. Further, the IAIS recognizes that some form of transitional measures and phasing-in for certain elements of the ICS may be necessary in some jurisdictions.
Interaction between ICS and Existing Frameworks:
The IAIS has said little to date regarding any form of jurisdiction recognition process to help supervisory authorities and insurance groups manage potential conflicts between the ICS and any local group solvency calculation requirements. This will be important for groups, as the challenges of managing different group metrics could be significant, especially if they react differently to proposed mitigating actions.
Recognizing that comparability of outcomes will only be achieved over time, the current focus will remain on developing the standard method approach.
The key components of the ICS remain valuation methodology, qualifying capital resources, risk measurement and capital requirements, as illustrated below.