The International Association of Insurance Supervisors (IAIS) has adopted the global Insurance Capital Standard (ICS), aiming to promote a resilient insurance sector.
IAIS members have also reportedly endorsed substantial updates to the IAIS Insurance Core Principles (ICPs) and Common Framework for the supervision of internationally active insurance groups (ComFrame).
For those unaware, the ICS provides a globally comparable risk-based measure of capital adequacy for internationally active insurance groups (IAIGs) and forms the quantitative element of ComFrame.
The IAIS explained that the ICS will serve as a group-wide prescribed capital requirement, which is a solvency control level below which supervisors will intervene on group capital adequacy grounds.
The Association went on, “The ICS will help ensure that IAIGs maintain sufficient capital to withstand potential stresses and thereby protect policyholders. It will also provide a consistent and transparent framework for supervisors to evaluate the financial soundness of IAIGs.”
Shigeru Ariizumi, IAIS Executive Committee Chair, commented, “The adoption of the ICS and these updated standards represent a pivotal moment for the global insurance sector. Taken together they will better safeguard the interests of policyholders and enhance financial stability at a time when a strong and resilient insurance sector is critical to tackling pressing societal challenges.”
Jonathan Dixon, IAIS Secretary General, said, “After a decade of robust development, four consultations, six field-testing exercises and five years of monitoring, I am delighted that the IAIS has adopted the Insurance Capital Standard as a prescribed capital requirement for IAIGs. The ICS is a testament to how collaborative efforts among global supervisors can lead to significant achievements.
“Despite the complexities and variations in supervisory and market practices across different jurisdictions, we have successfully charted a way forward together in creating a standard that will provide a common language for cross-border supervisory discussions on insurance group solvency in a world where we face many common and interconnected global risks.”
In response to this news, Insurance Europe has released a statement, noting that it welcomes the decision, given the ICS shares many of the key building blocks with existing European supervisory regimes, such as market-value balance sheet with key elements to recognise insurers’ long-term nature, risk-based capital requirements and full integration of internal models.
Insurance Europe continued, “After many years of development, the federation calls for assurances that the adoption of the ICS be recognised as the end point of the project, and ICS-related data requests will cease after this year’s monitoring period.
“The project has, Insurance Europe argues, achieved a key objective which is to improve national insurance supervisors’ understanding of other existing solvency frameworks. It therefore contributes to ensuring a high level of customer protection and financial stability globally.
“Given the high level of consistency with Solvency II – the EU’s prudential framework that governs the insurance industry – which requires higher overall levels of solvency capital, European insurers can already be considered to be meeting the new ICS requirements. Insurance Europe therefore considers the new rules should have little impact on European insurers.”
