IAIS Consults on Activities-Based Approach to Systemic Risk for Insurers

The consultation focuses on the development of policy measures in the context of IAIS standards and does not cover questions of implementation of policy measures. The consultation: 

• Provides an overview of the IAIS’s prior work on assessing and mitigating potential systemic risk in the insurance sector to help provide context for the current initiative
• Discusses the concept of an activities-based approach and examines it relative to the IAIS’s existing entity-based approach as well as work by other standard-setters
• Presents the approach that the IAIS intends to adopt to derive activities-based approach policy measures
• Describes the key steps of this approach, which include the identification of potentially systemic activities, the consideration of existing policy measures within the IAIS’s policy framework, and the
• process for assessing the residual risks or supervisory aspects that may warrant additional policy measures
• Notes that the application of an activities-based approach will necessarily require the use of proportionality as well as the consideration of cost and benefit aspects, which could lead to application of materiality thresholds or other restrictions of the scope on application, when appropriate

In accordance with its Systemic Risk Assessment and Policy Workplan, IAIS is developing an activities-based approach to systemic risk in the insurance sector, as part of the next three-year cycle for reviewing its approach to systemic risk, which is scheduled to conclude in 2019. IAIS plans to launch a second public consultation on its final proposals by the end of 2018. The second consultation will be launched after IAIS considers comments on this interim public consultation, completes further work on the development of policy measures to address potential systemically risky activities in the insurance sector, and completes review of its assessment methodology for the identification of global systemically important insurers (G-SIIs).

Comment Due Date: February 15, 2018

Keywords: International, Insurance, Activities Based Approach, Systemic Risk, Policy Workplan, IAIS