Coinciding with a plan to consider and evaluate alternative approaches to implementing an Insurance Capital Standard (ICS), the International Association of Insurance Supervisors (IAIS), during its November annual meeting, finalized a Holistic Framework for Systemic Risk in the Insurance Sector to be implemented in 2020.
As reported in the press release issued by the Financial Stability Board (FSB), key elements of the framework are as follows:
- An enhanced set of supervisory policy measures for macroprudential purposes.
- A global monitoring exercise by the IAIS designed to assess global insurance market trends and developments and detect the possible build-up of systemic risk in the global insurance sector.
- Mechanisms to allow for a collective assessment of potential global systemic risk and a coordinated supervisory response when needed.
- An assessment by the IAIS of the consistent implementation of the enhanced supervisory policy measures and powers of intervention.
The FSB in consultation with the IAIS and national insurance supervisors has affirmed the decision to suspend identifying Global Systemically Important Insurers (G-SII) beginning in 2020. In two years, the FSB will review the results of the holistic framework and determine if the GSII designation should be reinstituted or remain suspended.
Regarding the holistic framework, Team USA provided testimony to the U.S. Senate Committee on Banking, Housing and Urban Affairs during September 2019 on a path to view systemic risk in the marketplace. The National Association of Insurance Commissioners (NAIC) is developing a macroprudential initiative focused on forward looking activities and counter party exposures instead of size being a determining factor.
We continue to monitor domestic and global insurer capital requirements and supervisory initiatives and their impact on insurance markets.