Development of International Insurance Supervisory Standards Yoshihiro Kawai Secretary General International Association of Insurance Supervisors 19 November 2013 1 Outline 1. Background 2. Three-layer Approach 3. Insurance Core Principles (ICPs) 4. ComFrame 5. Global Insurance Capital Standard 6. Conclusion 2 1. Background Globalised insurer operations • IAIG’s (Internationally Active Insurance Groups) global market share is more than 50% AIG crisis • Interconnected markets / products / institutions 3 1. Background Host Structure of Internationally Active Insurance Groups Host Host Home Host Host 4 1. Background Interlinkage across borders Americas Europe Other regions Asia 5 1. Background Interlinkage across financial sector Banking Insurance Shadow Banking Securities 6 1. Background New regulatory focus: global and panoramic view • • • • Macroprudential approach Group-wide supervision Common supervisory language Coordination across sectors 7 Outline 1. Background 2. Three-layer Approach 3. Insurance Core Principles (ICPs) 4. ComFrame 5. Global Insurance Capital Standard 6. Conclusion 8 2. IAIS Three-layer Approach Outline 1. Background 2. Three-layer Approach 3. Insurance Core Principles (ICPs) 4. ComFrame 5. Global Insurance Capital Standard 6. Conclusion 10 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 Outline 1. Background 2. Three-layer Approach 3. Insurance Core Principles (ICPs) 4. ComFrame 5. Global Insurance Capital Standard 6. Conclusion 13 4. ComFrame Objectives: • Establish a comprehensive framework for group-wide supervision • Foster global convergence of regulatory and supervisory requirements Scope: • IAIGs and G-SIIs 4. ComFrame: 2013 Consultation • Comments due by 16 December 2013 • Comments requested on all aspects of ComFrame Including: - Capital adequacy assessment - Resolution 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 4. ComFrame: Scope of Group-wide Supervision and Power over Holding Companies Ultimate Holding Company Whole Diversified Conglomerate Retail Subgroup Manufacturing Sub-group Financial Conglomerate Financial Holding Company Banking subgroup Insurance Group Insurance Legal Entity Insurance Holding Company Insurance Legal Entity Insurance Legal Entity Outline 1. Background 2. Three-layer Approach 3. Insurance Core Principles (ICPs) 4. ComFrame 5. Global Insurance Capital Standard 6. Conclusion 18 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 ICS End 2016 • Development of ICS completed by IAIS 2017 - 2018 • Testing and refinement of ICS End 2018 • Adoption of ICS 2019 • 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.org [email protected] 25
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