IAIS head stands firm on approach to systemic risk

Expert outlines his position on controversial issue

IAIS head stands firm on approach to systemic risk

Insurance News

By Gabriel Olano

Even if the call to shift to an activities-based approach to gauging systemic risk in the insurance sector intensifies, Yoshihiro Kawai, secretary-general of the International Association of Insurance Supervisors (IAIS), says that the system of designating individual firms as global systemically important insurers (G-SII) will remain.

“There was a question as to whether the activities approach with either be complementary or a replacement,” Kawai said in a speech at the National Association of Insurance Commissioners’ international insurance forum in Washington, DC on Tuesday.

“Our position is that they coexist. Identifying systemic risk in an entities-based approach is still very legitimate.”

In 2016, the Financial Stability Board requested the IAIS work towards adopting an activities-based approach to systemic risk that would precisely identify which actions insurers take that could be considered systemically risky.

Earlier, Kawai said that the IAIS will launch a consultation regarding the activities-based approach in the second half of 2017, with a final implementation paper coming out a year later.

Meanwhile, Julian Adams, head of government relations at UK mega-insurer Prudential, which is classified as a G-SII, said that he hopes the activities-based approach would eventually supplant the previous entities approach in order to avoid regulators “double-counting” risks.

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