The International Association of Insurance Supervisors (IAIS) adopted the global Insurance Capital Standard during its annual general meeting on Thursday.
The IAIS also updated its IAIS Insurance Core Principles (ICPs) and Common Framework for the supervision of internationally active insurance groups (ComFrame).
IAIS Executive Committee Chair Shigeru Ariizumi said the ICS and the updates will better safeguard the interests of policyholders and improve the financial stability of internationally active insurance groups (IAIGs).
Currently, there are 59 IAIGs identified by supervisors from 18 jurisdictions across the globe, according to IAIS.
According to the IAIS, the ICS provides a risk-based measure of capital adequacy for IAIGs. It serves as a group-wide prescribed capital requirement. The ICS will help ensure that IAIGs maintain sufficient capital to withstand potential stresses and protect policyholders, the IAIS said.
Aside from protection of policyholders, the ICS will also provide a consistent and transparent framework for supervisors to evaluate the financial soundness of IAIGs.
In connection with the ICS, the IAIS also published additional supporting documents – the ICS calibration document, which provides an explanation of the calculation of the different ICS risk charges and their aggregation; the ICS economic impact assessment report, which provides an evaluation of potential effects of ICS implementation across jurisdictions, and the resolution of public comments.
As for the timeline, the IAIS said it expects to begin developing a detailed ICS assessment methodology by next year. It also expects to coordinate a baseline self-assessment by IAIS members of their progress in implementing the ICS by 2026. This standard will also serve as a baseline for future implementation progress monitoring. By 2027, the IAIS is aiming to initiate a detailed jurisdictional assessment of ICS implementation.
Aside from the launch of the ICS, the IAIS also updated its ICPs and certain related standards in ComFrame. The updated standards aim to ensure that the ICPs remain relevant and effective in addressing emerging risks and challenges faced by the insurance sector, the IAIS said. These updates address topics in climate risk, assessment and mitigation of systemic risk, as well as valuation and capital.
The ICPs form the globally accepted framework for supervision of the insurance sector and consist of principal statements, standards and guidance, while ComFrame builds upon the ICPs and establishes supervisory standards and guidance specifically focused on the effective group-wide supervision of IAIGs.
In a statement, Insurance Europe said European insurers have welcomed the ICS project by the IAIS. Insurance Europe said the ICS shares many of the key building blocks with existing European supervisory regimes.
“After many years of development, the federation calls for assurances that the adoption of the ICS be recognised as the end point of the project, and ICS-related data requests will cease after this year’s monitoring period,” Insurance Europe said.
Insurance Europe said that they expect the new rules under the ICS will have little impact on European insurers, given the “high level of consistency” of the ICS standard with the Solvency II standard, which is the European Union’s framework governing the insurance industry.
Meanwhile, Ariizumi said the IAIS expects to emphasize the globally consistent implementation of the ICS standards in the coming years.
