At the annual conference of trade association Insurance Europe in Malta on June 12, a panel of experts voiced their frustration at the manner in which the International Association of Insurance Supervisors (IAIS) is developing the basic capital requirement (BCR) for global systemically important insurers (G-Siis) and the insurance capital standard (ICS) for internationally active insurance groups.
Tom Wilson, chief risk officer at Allianz, said the uncertainties surrounding the BCR made it unlikely that G-Sii firms such as Allianz would be able to implement the standard by the scheduled date of November 2014.
Concerns about the BCR centre on the valuation basis that will be used to measure firms' assets and liabilities. Following a consultation on the proposed requirement earlier this year, insurers and trade associations strongly opposed the suggestion by the IAIS that assets be valued on a market-consistent basis without adjustments to account for the illiquid nature of the liabilities with which they are matched.
Peter Braumüller, chairman of the IAIS, speaking at the same conference, acknowledged these concerns but said the industry and supervisors had to move "past the rhetoric" in order to achieve a suitable compromise.
"We are well aware that the major challenge to achieving the principle of global comparability of the BCR is overcoming differences in valuation approaches. To address this issue we contemplate that the primary valuation basis for the traditional life and non-life exposures will be current estimates of liabilities and that the primary valuation for assets will reflect their fair values," he said.
Policy-makers also had fundamental questions to ask on the supervisory purpose of the ICS. Klaus Wiedner, head of the insurance and pensions unit at the European Commission, said that while the goal of the BCR was clearly to enhance financial stability, the goal of the ICS remained ambiguous.
Wiedner also cautioned the IAIS against any plans to develop an ICS that would undermine Solvency II. "We would not want to give up the core things we have achieved in Solvency II. The cost benefit analysis [of the ICS] has to be right. We need to be convinced that this is of added value," he said.
US supervisors were represented at the conference by Michael Consedine, Pennsylvania insurance commissioner, who emphasised that a mandatory, binding capital standard would be unlikely to receive the assent of the American industry.
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