IAIS Publishes Detailed Assessment of Observance of ICPs in Guernsey

The objectives of the assessment are to enhance the jurisdiction’s understanding of ICPs and aid in their implementation, to identify major differences between the existing practices and the international standards, and to provide recommendations and advice to help future development of the supervisory programs. The assessment was undertaken as part of a pilot project by IAIS in agreement with the Guernsey Financial Services Commission (GFSC). The assessment does not include the review of certain principles, including ICPs on anti-money laundering and countering financing of terrorism (ICP 22), group supervision (ICP 23), and macro-prudential (ICP 24).

Guernsey has a high level of observance of the existing international standards. In recent years, it has made a concerted effort to try and keep pace with the post 2011 ICP changes. It has also made other important investments in improving supervision. For example, requirements have been strengthened in the areas of insurer governance and internal controls, enterprise risk management requirements, conduct of business requirements, and cross-border cooperation and crisis management. Guernsey has also made significant investments and refinements to the Probability Risk and Impact System (PRISM), which is both an approach to supervision as well as a software application that facilitates supervisory work. In addition, centralization and reorganization of specialist functions in the supervisory organization have helped to increase efficiency and focus of supervisory efforts.

Guernsey is in the process of implementing several other important supervisory initiatives that should further strengthen and advance its level of observance. These include development and implementation of a new enforcement law, implementation of the new Own Risk and Solvency Assessment (ORSA) requirements, completion of work on cross-border crisis planning, implementing broader disclosure requirements for much of the market, and improving its focus on Conduct of Business issues. Consideration should be given to increasing the level of supervisory resources directed to insurance supervision, as this would help with strategic initiatives and fulsome offsite and onsite analysis of risks in institutions. GFSC should review the valuation standards and develop a plan for better observance of ICP 14 standards. Several other smaller issues, challenges, and recommendations have been noted in the report. In overview, however, supervisory programs appear to be well-organized, well-managed, and effective in dealing with policyholder risk, given the nature, scale, and complexity of the market.

Keywords: Europe, Guernsey, Insurance ICPs, ORSA, Observance of ICP, PRISM GFSC, IAIS