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November 02, 2017

IAIS announced a unified path to convergence of group capital standards to further its goal of a single Insurance Capital Standard (ICS), with the aim to achieve comparable outcomes across jurisdictions. This agreement responds to a call from members and stakeholders for more clarity on what the implementation of Insurance Capital Standard (ICS) Version 2.0 will mean in practice.

IAIS embarked on the development of the ICS to create a common language for supervisory discussions of group solvency to enhance global convergence among group capital standards. IAIS has agreed that implementation of ICS Version 2.0 will be conducted in two phases: a five-year monitoring phase, followed by an implementation phase. In the first phase, ICS Version 2.0 will be used for confidential reporting to group-wide supervisors and discussion in supervisory colleges. ICS will not be used as a Prescribed Capital Requirement in this phase (that is, the ICS results will not be used as a basis to trigger supervisory action). This will allow group-wide supervisors and host supervisors to discuss and assess the ICS in comparison with existing group capital standards or calculations that are in development.

The implementation (second) phase of ICS Version 2.0 will have two equally important components. The first is mandatory confidential reporting by all Internationally Active Insurance Groups, or IAIGs, of a reference ICS, which is based on market-adjusted valuation. The second is additional reporting, at the option of the group-wide supervisor, of ICS based on GAAP Plus valuation and/or an internal model-based capital requirement calculation. Following the announcement, by members from the United States, of development of an aggregation-based group capital calculation, IAIS has further agreed to collect data to allow it to assess by the end of the monitoring period, whether or not the aggregation method provides comparable outcomes to the ICS. 

Keywords: International, Insurance, ICS Version 2, Implementation, IAIG, Solvency II, IAIS

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