International developments dominate insurance regulatory reform under IAIS Framework

International events drive insurance regulatory reform

Summary of expected insurance supervision changes by IAIS and impacts on insurers.

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In 2015, the International Association of Insurance Supervisors (IAIS) continued to work towards insurance industry regulatory reform relating to Internationally Active Insurance Groups (IAIGs) and Global Systemically Important Insurers (G-SIIs). Significant themes of the IAIS Framework include group-wide insurance supervision and consistency of regulatory frameworks across geographical jurisdictions. 

With the Financial Stability Board (FSB) continuing to influence the IAIS work program, and two important consultations released in November 2015, it is clear that 2016 will be another pivotal year.  These initiatives may have an impact on insurers, especially in relation to:

  • Insurance Core Principles (ICPs)
  • The Global Insurance Capital Standard (ICS)
  • G-SII developments
  • The International Monetary Fund’s Financial Sector Assessment Program (FSAP) reviews.

IAIS Framework highlights

The IAIS Framework is a globally accepted framework for supervision of the insurance sector. It is structured in a series of increasing requirements depending on the nature of the entity being supervised:

  • The Insurance Core Principles (ICPs) are high-level principles-based standards to be followed in the supervision of insurers in all jurisdictions. These mainly apply to regulated insurance entities, but are supplemented by five group ICPs that apply to the wider insurance group.
  • The Common Framework for IAIGs (ComFrame) applies further requirements against the approximately 50 insurance groups that meet the IAIG definition. This population of firms will need to comply with the insurance capital standard that the IAIS is developing.
  • The G-SII population (nine groups currently) must comply with all the above and are subject to enhanced supervision due to their perceived systemic risk, inlcuding both additional capital requirements and recovery and resolution measures.

Application of IAIS Framework for insurers

The hierarchy of application of the requirements for insurers/insurance groups can be demonstrated in the chart below.

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