14 November 2019

IAIS adopts first global frameworks for supervision of internationally active insurance groups and mitigation of systemic risk

The IAIS adopted a comprehensive set of reforms that will enable effective cross-border supervision of insurance groups and contribute to global financial stability. These significant achievements were made possible by a shared commitment from the world’s insurance supervisors to the maintenance of fair, safe and stable insurance markets for the benefit and protection of policyholders.

The adopted reforms include:

• The Common Framework (ComFrame) establishes supervisory standards and guidance focusing on the effective group-wide supervision of Internationally Active Insurance Groups (IAIGs). ComFrame is a comprehensive and outcome-focused framework that provides supervisory minimum requirements tailored to the international activity and size of IAIGs. ComFrame will provide supervisors with a common language for the supervision of IAIGs. The implementation of ComFrame should result in more efficient supervisory processes, for the benefit of both supervisors and IAIGs. ComFrame builds on the revised set of Insurance Core Principles (ICPs), that are applicable to the supervision of all insurers, and which were adopted after extensive review.
• The Insurance Capital Standard (ICS) is being developed with the purpose of creating a common language for supervisory discussions of group solvency of IAIGs to enhance global convergence among group capital standards. The newly agreed ICS Version 2.0 for the five-year monitoring period, starting in January 2020, was developed through a structured and evidence-based approach, which included six quantitative Field Testing exercises over the course of 2014 to 2019, extensive stakeholder engagement and comprehensive discussion among IAIS Members. During the monitoring period, ICS Version 2.0 will not trigger any supervisory action but will be used for confidential reporting and discussion in supervisory colleges to provide feedback to the IAIS on the ICS design and performance. The IAIS has agreed to a detailed plan for the operationalisation of the monitoring period, including a workplan and timeline for the period 2020-2024 and a collective effort to make participation by IAIGs in the monitoring period as large as possible across different jurisdictions and business models.
• Lastly, in delivering its commitment to contribute to global financial stability, the IAIS adopted the Holistic Framework for the assessment and mitigation of systemic risk in the insurance sector, for implementation from the beginning of 2020. This framework recognises that systemic risk can arise both from sector-wide trends with regard to specific activities and exposures, as well as from a concentration of these activities and exposures in individual insurers. The Holistic Framework consists of an enhanced set of supervisory policy measures and powers of intervention, an annual IAIS global monitoring exercise and collective discussion on the outcomes and appropriate supervisory responses, and a robust implementation assessment.

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