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However, GFIA said the paper was “highly and unnecessarily prescriptive regarding what companies should do and even how they should do it”. It said the IAIS’s draft application paper on recovery planning implied that detailed recovery planning should be mandated for all companies.
“Yet there are many going concerns that should not expend resources as prescribed for a complex and detailed plan, when those resources could be better deployed in providing more insurance protection to the public,” said the GFIA. “[The] GFIA applauds the IAIS’s acknowledgment throughout the application paper of the need for a supervisor to consider ‘proportionality’ when determining recovery planning requirements for insurers under their supervision. Given the significant costs of recovery planning and the existence of other risk management tools and processes that may serve similar or overlapping purposes, supervisors must have the flexibility to tailor any recovery planning requirements as appropriate.”
It said supervisors should have the discretion to accept alternative submissions that collectively satisfy the agreed standards and goals, including robust ORSAs, capital and liquidity policies and other risk assessment, management and contingency plans that are also part of an insurer’s ERM framework.
According to GFIA, insurers very rarely fail rapidly in a disorderly manner and, in addition, most insurance groups do not perform critical operations, are far less susceptible than banks to ‘runs’, have greater liquidity buffers, and have limited interconnections to each other.
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