Setting Insurance Core Principles for compliance review | KPMG | GLOBAL

Establishing Insurance Core Principles and assessing insurance industry compliance

Setting Insurance Core Principles for compliance review

IAIS member countries set Insurance Core Principles and assess insurer compliance


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As part of global insurance regulatory reform, IAIS members are expected to implement the Insurance Core Principles (ICPs) into their national supervisory frameworks. ICP compliance is assessed by the IMF and World Bank who conduct annual Financial Sector Assessment Programme (FSAP) reviews on both a mandatory and voluntary basis. Mandatory FSAP assessments are required every five years for countries whose financial systems have been deemed by the IMF to be systemically important.

Categories of Insurance Core Principles

There are currently 26 ICPs, which can be divided into five broad categories:

  1. Supervisory powers and measures
  2. Solvency
  3. Group supervision, cooperation and crisis management
  4. Conduct of business, intermediaries and fraud prevention
  5. Coporate governance and public disclosure

IAIS review of ICPs

The IAIS began a three year review of all ICPs in 2015:

  • In November 2015, it adopted revisions to ICP 4: Licencing, 5: Suitability of Persons, 7: Corporate Governance, 8: Risk Management and Internal Controls, 23: Group-wide Supervision and 25: Supervisory Cooperation and Coordination.
  • In January 2016, it began the self-assessment and peer review of ICP 13: Reinsurance and Other Forms of Risk Transfer and ICP 24: Macroprudential Surveillance and Insurance Supervision.  

The IAIS also announced in January 2016 that it plans to issue a consultation document in mid 2016 proposing the application of recovery and resolution requirements applicable to all insurers. To date, only the nine G-SIIs have been subject to such requirements and the announcement of this extention has surprised many, with significant concerns regarding how this will be constructed to ensure it is proportionate to the rest of the insurance sector.

Results of Financial Sector Assessment Program (FSAP) reviews

These reviews include an analysis of compliance with relevant international standards, which for the insurance sector means an assessment of compliance with ICPs. As a result, we have seen a global drive among regulators over recent years to demonstrate ICP compliance. The most recent FSAP review for those countries whose financial systems have been deemed by the IMF to be systemically important is set out on page 6 of this chapter. 

2015 saw the release of the Detailed Assessment of Observance on ICP’s Compliance reports  on South Africa (March),  United States (April) and Ireland (May). Among the findings of these three reports, and the the four issued in 2014 (Switzerland, Canada, Hong Kong and Denmark):

  • A consistent area of perceived weakness relates to ICP 2: Supervisor, where six of the seven countries scored only partial observation.
  • Areas of concern raised included independence and challenges around staff recruitment and retention.
  • For ICP 23: Group-wide Supervision, five countries were graded partial observation, although most of these regimes are evolving in this area.
  • All four of the 2014 reviews reported only partial observation in relation to ICP 19: Conduct of Business, which is not reflected in the 2015 results.

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