30 August 2017

IAIS: Aggregate report on the self-assessment and peer review of ICPs 13 and 24

This report contains the aggregate findings of the self-assessments as well as the Expert Team’s recommendations and suggestions on steps the IAIS and its partners, as well as IAIS Members, could take to enhance ICP observance and understanding.

The objectives for the thematic SAPR on ICPs 13 and 24 were to:

• identify the observance of the Standards relating to the assessed theme;
• assess the effectiveness of implementation of the Standards in a consistent and coherent manner by independent peers;
• identify findings that should be communicated to the Executive Committee (EC), the IC and the FSTC in support of IAIS work in developing strong standards and securing effective implementation into supervisory practices;
• complement the IMF and WB FSAP process and Financial Stability Board (FSB) peer reviews;
• identify and analyse regional and global implementation.

The Expert Team believes, although the number of combined Observed/Largely Observed jurisdictions is high, the number of Observed assessments is comparatively low when compared to similar exercises carried out by the IAIS in respect to other ICPs. Moreover, the number of Partly Observed assessments is comparatively higher than other exercises. This appears to have some specific underlying causes that are discussed in detail in this report, and which reflect a challenging environment for implementation. Moreover, there seems to be regional differences in the level of observance of the various Standards under the two ICPs.

Some of the most common challenges to observance include:

• In respect to ICP 13, there seems to not be enough differentiation in the supervision of the ceding insurer’s reinsurance risk management. Although the IAIS welcomes that supervisors appear to be supervising reinsurance risk management in the context of the overall risk management carried out by the insurer, not enough specific supervisory attention is dedicated to reinsurance-specific risks (e.g. risks emerging from the timing of contractual documentation or liquidity risks).
• Regarding ICP 24, although nearly all supervisors report carrying out macroprudential surveillance of their insurance sector, the practice seems to be lacking in systematization, and formalisation (e.g. differences in scope, frequency and depth of the surveillance carried out, clarity in the macroprudential mandates). Moreover, supervisory practices seem to focus more on macroprudential surveillance than supervision.

The Expert Team feels that the IAIS should consider the following provisions:

• In relation to reinsurance, the provision of additional clarity and guidance on reinsurance-specific supervisory considerations;
• With respect to macroprudential surveillance and policy, the provision of guidance on tools and other resources that can contribute to carrying out macroprudential practices in a more systematic fashion, and additional clarity on the ‘division of labour’ between macroprudential surveillance and supervision goals and activities.

Full report

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