From the Desk of the Secretary General – March 2023

by Romain Paserot

Earlier this month, IAIS committees, including the Executive Committee (ExCo), met in Basel, where they made decisions on several key projects, notably related to our #HolisticFramework for assessing and mitigating risks for the global #InsuranceSector. Since then, the importance of our continuous work to contribute to #FinancialStability was underscored by the significant turbulence experienced in the banking sector and financial markets – of a level not experienced since the 2007-2008 Global Financial Crisis.?

An important tool for assessing key risks and trends in the global insurance sector is our Global Monitoring Exercise (GME). As part of the regular three-year review cycle, the IAIS conducted a review of the #GME, including the individual insurer monitoring (IIM) assessment methodology following a #PublicConsultation. The #IIM assessment methodology was found to deliver robust results over the 2020-2022 period. Nevertheless, in the spirit of continuous improvement and considering stakeholder feedback, at their meeting, the ExCo approved changes related to the scope of the IIM data collection, the IIM?#SystemicRisk indicators and total score calculation. An updated GME document reflecting main changes is planned to be published end-June.??

Also, as part of our risk assessment work, we investigate emerging risks facing the global insurance sector. The ExCo approved the next special topic for the Global Insurance Market Report (GIMAR), which will present an analysis of the risks and trends associated with cyber #InsuranceCoverage, #CyberResilience in the insurance sector and the impact these risks may pose to financial stability. This report will be published next month.?

Of course, the consistent implementation of our supervisory material related to the Holistic Framework is also critical to supporting the objective of ensuring the resilience of the global insurance sector. Over the past 18 months, a targeted jurisdictional assessment (TJA) was completed, covering 10 major insurance markets and carrying out in-depth verification of supervisory practices for the implementation of the Holistic Framework standards.??

At their meeting, the ExCo reviewed the TJA Public Report, which provides a summary of the assessment outcomes, and agreed to publish it in April to provide transparency on the status of implementation. Overall, the TJA results demonstrate strong?and consistent implementation of the Holistic Framework, with good levels of observance across many of its standards.

Milestone decisions were also made regarding the Insurance Capital Standard (ICS), a core element of IAIS standard-setting work. The #ICS is being developed as a consolidated group-wide capital standard for internationally active insurance groups (IAIGs). It will create a common language for supervisory discussions of group solvency and form the quantitative pillar of the Common Framework for the supervision of IAIGs.

This year marks an important step for the development of the ICS. A number of changes to define the candidate ICS as a prescribed capital requirement (PCR) were approved by the ExCo and will be consulted upon in Q3 2023. Data collected via the 2023 ICS data collection, as well as stakeholder feedback, will help to finalise the ICS specifications that will be adopted as a group-wide PCR year-end 2024.

Additionally, the ExCo agreed on the final criteria that will be used to assess whether the Aggregation Method (AM) provides comparable outcomes to the ICS. While the AM is not part of the ICS, the United States is developing an AM to a group capital calculation. If deemed comparable, the AM will be considered an outcome-equivalent approach for implementation of the ICS as a PCR. The finalisation of the criteria is an important step for the comparability assessment and equips the IAIS to begin the assessment in Q3 2023.

Directedly following the the ExCo meetings, Vicky Saporta, ExCo Chair, and I had the pleasure to share further details about the ICS at the Geneva Association’s PROGRES?meeting, and I discussed it further at a recent Peterson Institute for International Economics webinar.?

The ExCo also provided valuable direction on many other aspects of the IAIS’ work programme,?such as the first of a three-part consultation aimed at introducing a globally consistent approach to overseeing #Climate-related risks in the insurance sector, to put us on a sound footing to deliver on our commitments and provide continued value to our members and stakeholders. This month, however, with financial stability again making the front pages of all media, I wanted to take a moment to highlight the Association’s?efforts to contribute to this important topic.?