An international voluntary insurance association is to develop a risk-based global insurance capital standard (ICS) by 2016, set for full implementation by 2019.
The International Association of Insurance Supervisors, made up of supervisors and regulators from nearly 140 countries, plans to fully implement the comprehensive framework in 2019, after two years of testing and refinement with supervisors and internationally active insurance groups (IAIGs).
This commitment follows the IAIS’ announcement in July that it considers a sound capital and supervisory framework for the insurance sector essential for supporting financial stability and protecting policyholders.
A risk-based global ICS, which will be included in ComFrame and supervises IAIGs, will be the starting point in developing the ICS.
The IAIS will also develop straightforward, backstop capital requirements (BCRs), in 2014, which are planned to be finalised and ready for implementation by global systemically important insurers (G-SIIs) in late-2014.
BCRs will serve as the foundation for higher loss absorbency (HLA) requirements for G-SIIs, and it is anticipated that their development and testing will also inform development of the ICS.
“It is undeniable that the business of insurance is global, and global issues demand global responses,” said Peter Braumüller, chair of the IAIS executive committee. “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.”
“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,” said Michael McRaith, chair of the IAIS technical committee. “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.”