IAIS Statement on Monitoring Period of Insurance Capital Standard
IAIS published a statement from its Secretary General Jonathan Dixon on the Insurance Capital Standard (ICS) monitoring period. The statement informs about the IAIS expectations regarding participation in the monitoring period, the ultimate goal of a single global capital standard for Internationally Active Insurance Groups (IAIGs), and the refinement process of the ICS during the monitoring period. The draft definition of comparable outcomes and high-level principles will be subject to a public consultation later this year, as will the draft comparability criteria in 2021.
IAIS is developing the ICS as the global standard to be used as a prescribed capital requirement for Internationally Active Insurance Groups (IAIGs), based on a common set of principles. US members have indicated that their supervisory framework does not support a group-wide consolidated approach to a prescribed capital requirement. Therefore, the US and other interested jurisdictions are developing an Aggregation Method that follows a different approach than the ICS; they aim to use this approach for their implementation of the ICS on an outcome-equivalent basis. The Aggregation Method is not part of the ICS Version 2.0, nor is it being developed by IAIS as an alternate global standard.
The assessment of whether the Aggregation Method provides comparable outcomes to the ICS will be a technical assessment undertaken by IAIS. As a first step, IAIS has published a draft definition of comparable outcomes and considerations that will guide the development of high-level principles and criteria for the comparability assessment. IAIS has made it clear that this will be a robust and credible technical assessment that does not provide the Aggregation Method a free pass, while providing a viable path for the Aggregation Method to be deemed an outcome equivalent approach. This draft definition of comparable outcomes and high-level principles will be subject to a public consultation later this year, as will the draft comparability criteria in 2021.
The aim is to monitor the performance of the ICS over a period of time, rather than the capital adequacy of IAIGs. Active participation of IAIGs in the monitoring period is important for providing effective feedback on the ICS. IAIS does not have the legal power to directly mandate IAIGs to report the ICS results during the monitoring period. However, IAIS member supervisors collectively agreed to make participation as large as possible across different jurisdictions and business models, to ensure that the ICS captures risk appropriately. In addition to the feedback from supervisors, the IAIS will consider feedback from stakeholder engagement, a public consultation, and the results of an economic impact assessment, all of which could result in changes to the ICS Version 2.0. In the coming months, IAIS will collectively review the level of IAIG participation and discuss appropriate actions as necessary.
Keywords: International, Americas, US, Insurance, ICS, ICS Version 2, IAIG, Aggregation Method, Capital Adequacy, IAIS
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