Featured Product

    FSI Publishes Paper on Proportionality in Insurance Solvency Rules

    December 11, 2018

    FSI published a paper on proportionality in the application of insurance solvency requirements. This paper is based on a survey of 16 insurance authorities, of which eight have adopted a proportionate approach, thus allowing certain insurers to apply simplified regulatory requirements. The paper describes how the authorities identify insurers that are eligible for simplified solvency rules and also provides specific examples. This analysis provides insights on the key issues that the relevant authorities may need to consider in adopting a proportionate approach to the application of solvency requirements.

    The paper notes that insurance authorities have increasingly been taking a risk-based approach to prudential regulation and supervision, since the 1990s. In the process, the complexity of solvency requirements has increased significantly. Against this backdrop, some jurisdictions have taken a proportionate approach in applying such requirements. Under this type of regime, smaller or less complex insurers are eligible for simplified solvency rules, provided that the core prudential objectives of protecting policyholders' interests and maintaining financial stability are not compromised. 

    To develop a sound proportionate solvency framework, insurance regulators need to consider several critical issues. These include the extent to which simplified regulatory requirements may weaken incentives for insurers to manage their business properly, the trade-off between simplification and risk-sensitivity, and the absolute minimum level of complexity that may be needed to achieve prudential objectives. In addition, insurers should not be able to cherry-pick between the standard and proportionate requirements.


    Related Links

    Keywords: International, Insurance, Solvency Requirements, Proportionality, Regulatory Requirements, Solvency II, FSI

    Featured Experts
    Related Articles
    News

    FSB Examines Financial Stability Aspects of Bigtech and Cloud Services

    FSB published two reports that consider the financial stability implications from the offering of financial services by bigtech firms and the adoption of cloud computing and data services across a range of functions at financial institutions.

    December 09, 2019 WebPage Regulatory News
    News

    APRA Specifies Capital Treatment of Equity Investments in ABGF

    APRA published a letter to the authorized deposit-taking institutions outlining the regulatory capital treatment of their equity investments in the Australian Business Growth Fund (ABGF).

    December 09, 2019 WebPage Regulatory News
    News

    EBA Publishes Action Plan on Sustainable Finance

    EBA published the Action Plan on sustainable finance for banks.

    December 06, 2019 WebPage Regulatory News
    News

    EBA Single Rulebook Q&A: Second Update for December 2019

    EBA updated the Single Rulebook question and answer (Q&A) tool with answers to three questions under the Capital Requirements Regulation (CRR) and the second Payment Services Directive (PSD 2).

    December 06, 2019 WebPage Regulatory News
    News

    APRA Publishes Proposal to Increase Transparency of Banking Data

    APRA proposed to substantially increase the volume and breadth of data it makes publicly available on authorized deposit-taking institutions, including banks, credit unions, and building societies.

    December 05, 2019 WebPage Regulatory News
    News

    ESMA Consults on Guide to Internal Controls for Credit Rating Agencies

    ESMA launched a consultation on the guidelines on internal controls for credit rating agencies (CRAs).

    December 05, 2019 WebPage Regulatory News
    News

    EU Finalizes Directive and Prudential Rules for Investment Firms

    EU published, in the Official Journal of the European Union, the Directive (2019/2034) and Regulation (2019/2033) on the prudential requirements and supervision of investment firms.

    December 05, 2019 WebPage Regulatory News
    News

    OSFI Revises Guideline on Principles for Management of Liquidity Risk

    OSFI finalized Guideline B-6 on the principles for the management of liquidity risk.

    December 05, 2019 WebPage Regulatory News
    News

    ESAs Publish Draft Amendments to Bilateral Margin Requirements

    ESAs published joint draft regulatory technical standards to amend the Delegated Regulation on the risk mitigation techniques for non-cleared over-the-counter (OTC) derivatives as well as a joint statement on the introduction of fallbacks in OTC derivative contracts and the requirement to exchange collateral.

    December 05, 2019 WebPage Regulatory News
    News

    RBNZ Releases Final Decisions Related to Capital Review for Banks

    RBNZ released a paper that sets out its final decisions following the comprehensive review of its capital framework for banks, known as the Capital Review.

    December 05, 2019 WebPage Regulatory News
    RESULTS 1 - 10 OF 4289