development of international insurance supervisory standards

Development of International Insurance Supervisory Standards

Yoshihiro KawaiSecretary General

International Association of Insurance Supervisors

19 November 2013

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2

Outline

1. Background

2. Three-layer Approach

3. Insurance Core Principles (ICPs)

4. ComFrame

5. Global Insurance Capital Standard

6. Conclusion

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1. Background

Globalised insurer operations• IAIG’s (Internationally Active

Insurance Groups) global market share is more than 50%

AIG crisis • Interconnected markets / products /

institutions

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Home

HostHost

Host

HostHost

Structure of Internationally Active Insurance Groups

1. Background

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EuropeAmericas

Other regions Asia

Interlinkage across borders

1. Background

SecuritiesShadow Banking

Banking Insurance

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Interlinkage across financial sector

1. Background

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1. Background

New regulatory focus: global and panoramic view

• Macroprudential approach • Group-wide supervision• Common supervisory language• Coordination across sectors

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Outline

1. Background

2. Three-layer Approach

3. Insurance Core Principles (ICPs)

4. ComFrame

5. Global Insurance Capital Standard

6. Conclusion

2. IAIS Three-layer Approach

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Outline

1. Background

2. Three-layer Approach

3. Insurance Core Principles (ICPs)

4. ComFrame

5. Global Insurance Capital Standard

6. Conclusion

3. ICPs

Scope: • Insurance legal entities and insurance

groups (unless otherwise specified)

Three levels:• Principles, Standards, and Guidance

Proportionality:• Tailored approach taking into account

nature, scale and complexity of insurers.

3. ICP 23 on Group-wide Supervision

23.1 Identification of the scope of the group

23.3 The supervisor does not narrow the identified scope of the group due to lack of legal authority and/or supervisory power

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Outline

1. Background

2. Three-layer Approach

3. Insurance Core Principles (ICPs)

4. ComFrame

5. Global Insurance Capital Standard

6. Conclusion

4. ComFrame

Objectives:• Establish a comprehensive framework for

group-wide supervision• Foster global convergence of regulatory and

supervisory requirements

Scope: • IAIGs and G-SIIs

• Comments due by 16 December 2013• Comments requested on all aspects of

ComFrame

Including: - Capital adequacy assessment- Resolution

4. ComFrame: 2013 Consultation

4. ComFrame: Field Testing Module 1

• Module 1 field testing launched with a survey of all IAIS Members

• Responses due by 16 December

Survey includes:

- Scope of group wide supervision

- Population of IAIGs

- Powers over the holding company

Ultimate Holding Company

Insurance Legal Entity

Insurance Legal Entity

Insurance Legal Entity

Financial Holding Company

Insurance Holding Company

Retail Sub-group

Manufacturing Sub-group

Banking sub-group

Whole Diversified Conglomerate

Financial Conglomerate

Insurance Group

4. ComFrame: Scope of Group-wide Supervision and Power over Holding Companies

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Outline

1. Background

2. Three-layer Approach

3. Insurance Core Principles (ICPs)

4. ComFrame

5. Global Insurance Capital Standard

6. Conclusion

5. Risk-based global insurance capital standard (ICS)

• What is ICS (Global Insurance Capital Standard) ?

• Why ICS now?

• Why capital?

• When it is to be developed?

5. ICS: What is ICS (Global Insurance Capital Standard)?

• Not regional led approach

• Not banking led approach

• Unique IAIS initiative

5. ICS: Why ICS now?

• IAIS ExCo intensive discussions

• No quantitative IAIS benchmarks

• No common supervisory language

• Solvency II’s development

5. ICS: Why capital?

• Capital is key supervisory tool

• Capital has significant positive impact on other supervisory standards

• Capital is a trigger to develop a common supervisory language

5. ICS: When is it to be developed?

Date Activity

Early 2014 • Testing of BCRs (Backstop Capital Requirements) • Testing ICS (in particular valuation)

November 2014 • BCRs finalised and ready for implementation by G-SIIs

2015 - 2016 • Testing of ICSEnd 2016 • Development of ICS completed by IAIS2017 - 2018 • Testing and refinement of ICS

End 2018 • Adoption of ICS2019 • Implementation of ICS begins

6. Conclusion: a panoramic supervisory view

• Macroprudential approach- G-SII discussion

• Group-wide supervision- ComFrame and revision to ICP23- Enhanced supervision for G-SIIs

• Common supervisory language - ComFrame- ICS

• Coordination across sectors- NTNI (non traditional and non insurance) focused G-SII policy framework

Thank you very much

www.iaisweb.orgyoshihiro.kawai@bis.org

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