Development of International Insurance Supervisory Standards Yoshihiro Kawai Secretary General International Association of Insurance Supervisors 19 November 2013

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Outline 1. Background 2. Three-layer Approach 3. Insurance Core Principles (ICPs) 4. ComFrame 5. Global Insurance Capital Standard 6. Conclusion

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1. Background Globalised insurer operations

• IAIG’s (Internationally Active Insurance Groups) global market share is more than 50%

AIG crisis

• Interconnected markets / products / institutions 3

1. Background Structure of Internationally Active Insurance Groups Host Host Home Host Host Host

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1. Background Interlinkage across borders Americas Europe Other regions Asia

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1. Background Interlinkage across financial sector Banking Insurance Shadow Banking Securities

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1. Background New regulatory focus: global and panoramic view

• • • • Macroprudential approach Group-wide supervision Common supervisory language Coordination across sectors 7

Outline

1. Background

2. Three-layer Approach

3. Insurance Core Principles (ICPs) 4. ComFrame 5. Global Insurance Capital Standard 6. Conclusion 8

2. IAIS Three-layer Approach

Outline

1. Background 2. Three-layer Approach

3. Insurance Core Principles (ICPs)

4. ComFrame 5. Global Insurance Capital Standard 6. Conclusion 10

3. ICPs Scope:

• Insurance legal entities and insurance groups (unless otherwise specified)

Three levels:

• Principles, Standards, and Guidance

Proportionality:

• Tailored approach taking into account nature, scale and complexity of insurers.

3. ICP 23 on Group-wide Supervision

23.1 Identification of the scope of the group 23.3 The supervisor does not narrow the identified scope of the group due to lack of legal authority and/or supervisory power

Outline

1. Background 2. Three-layer Approach 3. Insurance Core Principles (ICPs)

4. ComFrame

5. Global Insurance Capital Standard 6. Conclusion 13

4. ComFrame Objectives:

• Establish a comprehensive framework for group-wide supervision • Foster global convergence of regulatory and supervisory requirements

Scope:

• IAIGs and G-SIIs

4. ComFrame: 2013 Consultation

• Comments due by 16 December 2013 • Comments requested on all aspects of ComFrame Including: - Capital adequacy assessment - Resolution

4. ComFrame: Field Testing Module 1

• Module 1 field testing launched with a survey of all IAIS Members • Responses due by 16 December Survey includes: - Scope of group wide supervision - Population of IAIGs - Powers over the holding company

4. ComFrame: Scope of Group-wide Supervision and Power over Holding Companies

Whole Diversified Conglomerate Retail Sub group Manufacturing Sub-group Ultimate Holding Company Financial Conglomerate Financial Holding Company Banking sub group Insurance Group Insurance Holding Company Insurance Legal Entity Insurance Legal Entity Insurance Legal Entity

Outline

1. Background 2. Three-layer Approach 3. Insurance Core Principles (ICPs) 4. ComFrame

5. Global Insurance Capital Standard

6. Conclusion 18

5. Risk-based global insurance capital standard (ICS)

• What is ICS (Global Insurance Capital Standard) ?

• Why ICS now?

• Why capital?

• When it is to be developed?

5. ICS: What is ICS (Global Insurance Capital Standard)?

• Not regional led approach • Not banking led approach • Unique IAIS initiative

5. ICS: Why ICS now?

• IAIS ExCo intensive discussions • No quantitative IAIS benchmarks • No common supervisory language • Solvency II’s development

5. ICS: Why capital?

• Capital is key supervisory tool • Capital has significant positive impact on other supervisory standards • Capital is a trigger to develop a common supervisory language

5. ICS: When is it to be developed?

Date

Early 2014 November 2014 2015 - 2016 End 2016 2017 - 2018 End 2018 2019

Activity

• Testing of BCRs (Backstop Capital Requirements) • Testing ICS (in particular valuation) • BCRs finalised and ready for implementation by G-SIIs • Testing of ICS • Development of ICS completed by IAIS • Testing and refinement of ICS • Adoption of ICS • Implementation of ICS begins

6. Conclusion: a panoramic supervisory view

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Macroprudential approach

- G-SII discussion

Group-wide supervision

- ComFrame and revision to ICP23 - Enhanced supervision for G-SIIs

Common supervisory language

- ComFrame - ICS

Coordination across sectors

- NTNI (non traditional and non insurance) focused G-SII policy framework

Thank you very much

www.iaisweb.org

[email protected]

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