IAIS published the Global Insurance Market Report (GIMAR) for 2019. The report discusses the global insurance and reinsurance sectors, with focus on the performance of the sector, key risks facing the sector, and key developments in the global insurance market from a supervisory perspective. The report also presents the results of the Global Reinsurance Market Survey covering 47 reinsurers in nine jurisdictions in North America, Europe, and Asia while linking the financial position of reinsurers to the broader financial economy.
The GIMAR report discusses the performance of life insurance sector within a prolonged low-yield environment. It highlights that the sector may be subject to various risks and challenges, given a potential rate increase or a sluggish growth of guaranteed rate products sales. The report for this year also focuses on the specificities of cyber insurance and how insurers tackle risk pricing in light of the lack of historical data sets. The report presents the key challenges and regulatory considerations associated with cyber insurance. The report recommends that supervisors need to share information and best practices to enhance their own ability to evaluate the pricing and exposure of insurers within their jurisdictions. They also need to consider how they can support an integrated approach to cyber risk that will adequately reflect the risk in insurers’ strategy and risk appetite. Initiatives are under way in several countries to foster greater risk awareness and to push insurers to adopt conscious risk management and supervision, but additional efforts are required by both supervisors and insurers.
One key finding of the Global Reinsurance Market Survey is that the reinsurance market is still recovering and further consolidating its capacity following the series of severe natural catastrophes that took place in 2017. However, capital has proven an effective loss buffer when held at sufficient levels. The Survey demonstrates the extent to which the reinsurance industry relies on retrocession as a tool to reduce and diversify risk. If the trend of declining retrocession persists, the industry may experience a shift toward other risk-mitigating mechanisms. Equity and debt securities still remain the largest asset classes for investment in the reinsurance industry, cumulatively accounting for 77.5%. Short-term portfolios tend to be invested in highly liquid securities, while reinsurers’ exposures are mainly concentrated in the insurance market.
Keywords: International, Insurance, Reinsurance, GIMAR, Macro-Prudential Policy, Cyber Insurance, Life Insurance, Regtech, Global Market Reinsurance Survey, IAIS
The Board of Governors of the Federal Reserve System (FED) adopted the final rule on Adjustable Interest Rate (LIBOR) Act.
The European Central Bank (ECB) published an updated list of supervised entities, a report on the supervision of less significant institutions (LSIs), a statement on macro-prudential policy.
The Hong Kong Monetary Authority (HKMA) published a circular on the prudential treatment of crypto-asset exposures, an update on the status of transition to new interest rate benchmarks.
The European Commission (EC) adopted the standards addressing supervisory reporting of risk concentrations and intra-group transactions, benchmarking of internal approaches, and authorization of credit institutions.
The China Banking and Insurance Regulatory Commission (CBIRC) issued rules to manage the risk of off-balance sheet business of commercial banks and rules on corporate governance of financial institutions.
The Hong Kong Monetary Authority (HKMA) made announcements to address sustainability issues in the financial sector.
The European Banking Authority (EBA) published regulatory standards on identification of a group of connected clients (GCC) as well as updated the lists of identified financial conglomerates.
The General Board of the European Systemic Risk Board (ESRB), at its December meeting, issued an updated risk assessment via the quarterly risk dashboard and held discussions on key policy priorities to address the systemic risks in the European Union.
The Financial Conduct Authority (FCA) is seeking comments, until December 21, 2022, on the draft guidance for firms to support existing mortgage borrowers.
The Financial Stability Board (FSB) published a report that assesses progress on the transition from the Interbank Offered Rates, or IBORs, to overnight risk-free rates as well as a report that assesses global trends in the non-bank financial intermediation (NBFI) sector.