Global

Details

  • Industry: Financial Services, Insurance
  • Type: Business and industry issue
  • Date: 2/20/2012

IAIS adopts core principles, develops ComFrame 

IAIS adopts core principles
An update on the efforts of the International Association of Insurance Supervisors (IAIS) to build a common framework for supervising Internationally Active Insurance Groups (IAIG) – and look at the framework’s likely impact on insurers.

IAIS adopts core principles

In October 2011, the International Association of Insurer Supervisors (IAIS) agreed and adopted a set of Insurance Core Principles (ICPs), thereby opening the door to at least the possibility of a globally consistent approach to insurance regulation.


Essentially, the principles require supervisors to establish risk-based solvency requirements – thereby taking a total balance sheet approach that addresses all reasonably foreseeable and relevant material risks.


In addition, the IAIS also requires supervisors to direct insurers to link their front-end acceptance and monitoring of risk more closely with their overall strategic goals and appetite for risk. Download the report, available to the right, for more details.

Considerable impact

For many jurisdictions, enacting such changes into local frameworks will require significant effort. The impact on the insurance sector is likely to be considerable, especially in developing markets such as Eastern Europe, Africa, South America, the Middle East and many other parts of Asia.


ComFrame taking shape – though many issues remain

Globally, insurance regulators lack a consistent approach to the supervision of Internationally Active Insurance Groups (IAIGs).


In July last year, the IAIS presented its initial concept paper for ComFrame, a common framework for the supervision of IAIGs.


This framework could:

 

  • develop an effective group-wide approach to supervising IAIGs that fully accounts for the way insurers work
  • establish an internationally-integrated approach to supervising insurers’ group-wide activities and risks
  • facilitate increased convergence of global regulatory and supervisory measures and approaches.

Still some way to go

However, while ComFrame attracted broad support from IAIS members and observers, disagreements soon began to surface – especially with regard to solvency issues.


For example, supervisors still need to resolve differences relating to:

 

  • the use and scope of a total balance sheet approach
  • accounting measures
  • measurement of risk
  • approaches to capital requirements, stress and scenario testing; solvency control levels and to the supervisory assessment process
  • the scope of an insurance group
  • the aim of a group capital assessment
  • whether or not ComFrame should require different intervention levels – or use single or multiple methodologies for determining capital requirements
  • how many supervisors should oversee an IAIG (as well as the legal implications of this decision
  • the globally acceptable level of policyholder protection
  • the role and future of the IAIS as an international standard setter
  • ComFrame’s implementation timeline.
 

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