10 April 2017

Fitch: International insurance regulation progressing slowly

Fitch Ratings says that the development of international regulation for insurance is continuing with several consultations in progress. However, significant barriers to implementation of the new standards remain.

The International Association of Insurance Supervisors (IAIS) has further developed its methodology on the designation criteria for Global Systemically Important Insurers (G-SIIs). The development is intended to increase transparency over the criteria for insurers' inclusion on the list.

Existing and prospective G-SIIs will be able to request their scores from the initial assessment stage of the designation process, which could help them to modify their strategy in view of the potential implications of G-SII designation.

The IAIS is also in the process of creating a risk-based global Insurance Capital Standard (ICS) for G-SIIs and other Internationally Active Insurance Groups (IAIGs). The IAIS's ultimate goal is a single ICS with a common methodology to achieve comparable outcomes across jurisdictions, although in the immediate term two valuation approaches are likely to be allowed.

No date has been set for the adoption of an ICS based on a single calculation methodology. Fitch believes it will be particularly difficult to implement because of potential uncertainty on cross-border regulation where various competing regulatory bodies could have conflicting or overlapping mandates.

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