Featured Product

    FSI Brief on Insurance Regulatory Measures in Response to COVID Crisis

    April 23, 2020

    FSI published a brief report providing a non-exhaustive summary of the regulatory measures announced by insurance authorities to achieve four objectives amid COVID-19 pandemic. These objectives are preserving capital adequacy of insurers, mitigating excessive procyclical investment behavior of insurers, providing temporary relief from non-essential regulatory and supervisory requirements, and preserving the continuity of insurance coverage.

    The far-reaching impact of COVID-19 calls for sustained vigilance on the part of supervisors and insurers. The FSI brief highlights that many insurance authorities have responded mainly by taking measures to provide operational relief to insurers from regulatory and supervisory requirements. Such measures, which will help insurers to enhance risk monitoring of their COVID-19 financial exposures, include:

    • Extending deadlines to submit regular supervisory reports
    • Allowing submission of pro-forma unaudited financial reports (Guernsey, Jersey, Tunisia)
    • Postponing public consultation of new or revised regulatory or supervisory measures (Canada, Dubai, EIOPA, Malaysia, Peru, Singapore, New Zealand, and the United Kingdom)

    Additionally, some authorities have set out expectations for insurers to conserve capital through prudent exercise of dividend and variable remuneration policies. The brief highlights that capital-related measures should relieve supervisory pressure and reduce the tendency of insurers to manage their investments procyclically. These measures include extending the supervisory intervention ladder, triggering the countercyclical lever, and recalibrating capital requirements. Other capital-related measures in response to COVID-19 include the following:

    • Allowing loans or premium payment deferrals not to increase capital requirements (Canada, South Africa)
    • Adjustment to capital requirements for interest rate risk (Canada, Malaysia)
    • Favorable consideration of requests for application of transitional measures on technical provisions under Solvency II (Germany, Poland, United Kingdom)

    The extraordinary regulatory measures to provide operational relief to insurers and preserve the continuity of insurance services should be reviewed constantly. A well-designed solvency framework should stand the test of time and should not require frequent ad hoc adjustments that may go against the intended policy objective of withstanding extreme events. Care should be taken to avoid morally hazardous behavior among insurers that could encourage them to expect regulatory relief when the next crisis arrives. As we look toward the post-pandemic phase, the extraordinary measures that are currently warranted will need to be unwound. These recent actions by supervisors and insurers may have long-lasting implications for the industry. Their potential effect on the industry’s reputation and trustworthiness should be carefully considered. An exit strategy that balances sound risk management practices with the need to treat customers fairly will become necessary for insurers and supervisors.


    Related Links 

    Keywords: International, Insurance, COVID-19, Solvency II, Reporting, Deadline Extension, Capital Requirements, Volatility Adjustment, FSI

    Featured Experts
    Related Articles

    EC Rule on Contractual Recognition of Write Down and Conversion Powers

    The European Commission (EC) published the Delegated Regulation 2021/1527 with regard to the regulatory technical standards for the contractual recognition of write down and conversion powers.

    September 17, 2021 WebPage Regulatory News

    APRA Issues Further Guidance on Application of Securitization Standard

    The Australian Prudential Regulation Authority (APRA) published a new set of frequently asked questions (FAQs) to provide guidance to authorized deposit-taking institutions on the interpretation of APS 120, the prudential standard on securitization.

    September 16, 2021 WebPage Regulatory News

    SRB Provides Update on Approach to Prior Permissions Regime

    The Single Resolution Board (SRB) published a Communication on the application of regulatory technical standard provisions on prior permission for reducing eligible liabilities instruments as of January 01, 2022.

    September 16, 2021 WebPage Regulatory News

    APRA Publishes FAQs on Capital Treatment of Overseas Subsidiaries

    The Australian Prudential Regulation Authority (APRA) published a new set of frequently asked questions (FAQs) to clarify the regulatory capital treatment of investments in the overseas deposit-taking and insurance subsidiaries.

    September 15, 2021 WebPage Regulatory News

    EBA Finalizes Guidance to Assess Breaches of Large Exposure Limits

    The European Banking Authority (EBA) published the final report on the guidelines specifying the criteria to assess the exceptional cases when institutions exceed the large exposure limits and the time and measures needed for institutions to return to compliance.

    September 15, 2021 WebPage Regulatory News

    PRA Finalizes Changes to Consolidated Prudential Rules Under CRD5/CRR2

    The Prudential Regulation Authority (PRA) issued the policy statement PS20/21, which contains final rules for the application of existing consolidated prudential requirements to financial holding companies and mixed financial holding companies.

    September 15, 2021 WebPage Regulatory News

    EBA Revises Guidelines on Stress Tests of Deposit Guarantee Schemes

    The European Banking Authority (EBA) revised the guidelines on stress tests to be conducted by the national deposit guarantee schemes under the Deposit Guarantee Schemes Directive (DGSD).

    September 15, 2021 WebPage Regulatory News

    Nordea Bank and EIB Sign Agreement to Fund Green Projects in Nordics

    The European Commission (EC) announced that Nordea Bank has signed a guarantee agreement with the European Investment Bank (EIB) Group to support the sustainable transformation of businesses in the Nordics.

    September 15, 2021 WebPage Regulatory News

    HKMA Endorses Industry Guidance to Support LIBOR Transition

    The Hong Kong Monetary Authority (HKMA) issued a circular, for all authorized institutions, to confirm its support of an information note that sets out various options available in the loan market for replacing USD LIBOR with the Secured Overnight Financing Rate (SOFR).

    September 14, 2021 WebPage Regulatory News

    OCC Issues Booklet on Supervision of Problem Banks

    The Office of the Comptroller of the Currency (OCC) issued a new "Problem Bank Supervision" booklet of the Comptroller's Handbook. The booklet covers information on timely identification and rehabilitation of problem banks and their advanced supervision, enforcement, and resolution when conditions warrant.

    September 13, 2021 WebPage Regulatory News
    RESULTS 1 - 10 OF 7481