11 Декабрь 2024 Tim Brown Financial Regulation - Insurance

IAIS adopts Insurance Capital Standard and updates existing qualitative standards

On 5 December 2024, the International Association of Insurance Supervisors (the “IAIS”) announced that it had adopted a global capital standard for insurance supervision, known as the “insurance capital standard” or “ICS”. It has also updated a number of its existing qualitative global standards for insurance supervision.

Insurance capital standard

The ICS provides a globally comparable risk-based measure of capital adequacy for internationally active insurance groups (“IAIGs”). The IAIS describes IAIGs as “often complex groups operating across multiple jurisdictions and regions” and comments that this amplifies the importance of having a common language for solvency supervision in relation to them. The ICS forms the quantitative element of the IAIS’ Common Framework for the supervision of IAIGs (“ComFrame”) and will serve as a group-wide prescribed capital requirement (i.e. a solvency control level below which supervisors will intervene on group capital adequacy grounds).

The ICS has been under development for a number of years. This work has included a five year monitoring period (2020-2024), over the course of which an earlier iteration of the ICS was used for confidential reporting and discussion, so as to facilitate the development of the final standard. During the monitoring period, the ICS results were not used as a basis to trigger supervisory action. Now that the monitoring period has ended, the IAIS intends that group-wide supervisors will use the ICS as a binding requirement, at the group level, for IAIGs headquartered in their jurisdictions.

59 IAIGs have currently been identified by group-wide supervisors from 18 jurisdictions. The IAIS believes that the ICS will help to ensure that IAIGs maintain sufficient capital to withstand potential stresses and that it should also provide a consistent and transparent framework for supervisors to evaluate the financial soundness of IAIGs. 

The overarching principles and concepts of the ICS are contained in a Level 1 text, with further detailed specifications in a Level 2 text. A document has been published which contains both. Other documents published by the IAIS include an ICS calibration document, an ICS economic impact assessment report and a resolution of public comments document (which provides the IAIS’ response to stakeholder feedback to its 2023 ICS public consultation).

Implementation

The IAIS says that its members are committed to implementing IAIS standards and that several members are already taking steps to embed the ICS in their regulatory regimes. It has set high-level timelines for its plans to assess the comprehensive and consistent implementation of the ICS across jurisdictions. The IAIS has said that these timelines recognise that it will take some time for jurisdictions to finalise any necessary regulatory and supervisory changes to align with the ICS. The timelines are as follows:

  • In 2025, the IAIS will begin developing a detailed ICS assessment methodology.
  • In 2026, the IAIS will coordinate a baseline self-assessment by IAIS members of their progress in implementing the ICS, which will serve as a baseline for future implementation progress monitoring.
  • With the aim of starting in 2027, the IAIS will initiate detailed jurisdictional assessments of ICS implementation.

As set out in the IAIS’ recent Aggregation Method comparability assessment report, an Aggregation Method (“AM”) developed by the United States provides a basis for US implementation of the ICS to produce comparable outcomes. The comparability assessment highlighted some areas where work as part of implementation of the final AM in the US will help ensure convergence. In using the final AM as its implementation of the ICS, the US commits to addressing those areas in appropriate ways, which will be reviewed during the IAIS ICS implementation assessment process.

Updates to Insurance Core Principles and ComFrame

The IAIS has also finalised a targeted update of its insurance core principles (“ICPs”) and certain related standards in ComFrame. The ICPs form the globally accepted framework for supervision of the insurance sector and consist of principal statements, standards and guidance. ComFrame builds upon the ICPs and establishes supervisory standards and guidance specifically focused on the effective group-wide supervision of IAIGs.

Following a significant update of these global standards in 2019, the current, more targeted update aims to ensure that the ICPs remain relevant and effective in addressing emerging risks and challenges faced by the insurance sector today. The updated areas relate to: 

  • climate risk;
  • liquidity risk, counterparty risk appetite, contingency funding plans, and recovery and resolution; and
  • valuation and capital adequacy.

The updated ICPs and ComFrame are available here. The IAIS says that its members are committed to implementing the updated ICP and ComFrame standards from 2025.