From the Desk of the Secretary General – June 2024

By Jonathan Dixon

This past month, IAIS committees, including the Executive Committee (ExCo), met in Basel. Productive discussion and a collaborative atmosphere led to decisions on several key projects, which will be detailed in our upcoming June newsletter. These included agreements on the next steps for implementation of the Insurance Capital Standard (ICS) and the consultation on our Application Paper on how to achieve fair treatment for diverse consumers.

We also agreed on the key themes for the September collective discussion amongst supervisors on systemic risk assessment and mitigation in the global insurance sector; and following from that approved for publication the mid-year Global Insurance Market Report (GIMAR) update – a preview of the data and analysis from our 2024 Global Monitoring Exercise (GME) – which will be published on Monday.

The GME is built upon a robust and comprehensive data set collected from approximately 60 of the largest international insurance groups, as well as aggregate sector-wide data from supervisors worldwide. This data covers over 90% of global written premiums, providing a comprehensive view on key risks and trends facing the global insurance sector.

It also leverages input collected through stakeholder engagement – including regional outreach, GME workshops and roundtables held by the ExCo with Chief Risk Officers from leading insurance groups.

The ExCo noted that the GME’s interim results indicate overall resilience in the insurance sector in 2023. The analysis shows slight improvements in solvency, liquidity and profitability positions compared to the previous year. However, aggregate systemic risk scores increased at the end of 2023, primarily due to an uptick in the level 3 assets* indicator. This uptick was primarily driven by accounting changes. The impact of these changes on the underlying risk profiles will be assessed in more depth as part of our ongoing work to refine the GME.

The analysis and discussion of the 2024 GME data in September will delve deeper into the key macroprudential themes identified last year, as these continue to be a top priority for both insurers and supervisors. These themes include the risks insurers face in the challenging and uncertain macroeconomic environment, as well as the structural shifts occurring in the life insurance sector relating to the increased asset allocation to alternative investments and the increased use of cross-border asset intensive reinsurance. Supervisory matters from this last sub-theme will feed into an Issues Paper, planned for publication in 2025.

The mid-year GIMAR 2024 will also highlight two other areas of increased supervisory focus: operational resilience to cyber risk and climate-related risks.

Recognising the significance of these risks, the IAIS is taking the following actions: firstly, actively developing objectives to support insurers' operational resilience, particularly in the realm of cyber resilience; and secondly, undertaking more in-depth work on climate-related risks, with a dedicated chapter of the year-end GIMAR and in a GIMAR special topic edition on the potential financial stability implications of natural catastrophe (NatCat) protection gaps, to be published in 2025.

The full 2024 GIMAR, to be released at the end of this year, will provide a comprehensive analysis of potential systemic risk developments in the insurance sector. It will offer insightful comparisons to the banking sector and provide more details regarding solvency, profitability and liquidity positions. Additionally, the report will provide an in-depth exploration of the key themes derived from the 2024 GME, which will be discussed by supervisors in September.

Looking ahead, we have the virtual Global Seminar coming up 9-11 July, where we will further discuss these topics both in the committee dialogue and during a panel session on insurers’ asset management in a changing interest rate environment. I look forward to seeing many of our members and stakeholder there.

*1 Level 3 assets are illiquid, hard-to-value assets.