Global regulators have finalised new rules, which will come into force in 2019, requiring those insurers deemed by the Financial Stability Board (FSB) to be globally systemically important insurers (G-SIIs) to hold more capital in a move that is aimed at ensuring greater global financial stability. Following the global financial crisis, the FSB has sought to tighten national supervision across a range of institutions, with insurance companies the latest target. The move is seen as an attempt to prevent taxpayer bailouts of the industry in a crisis.
At the request of the FSB, the International Association of Insurance Supervisors (IAIS) has put together the two new requirements and these have been endorsed by the FSB. The first requirement, known as the basic capital requirement (BCR), follows the amount each insurer is required to hold by national law. The second requirement, the higher loss absorbency (HLA), is expected to be approximately 10% of the BCR but the exact level will depend on the type of business and how systemically important regulators deem the insurer to be. Non-traditional and non-insurance (NTNI) activities carry the largest surcharges, of between 12% and 25%, and industry and regulators are currently debating what constitutes NTNI. The nine G-SIIs which will be subject to the requirements are currently: Prudential, Allianz, MetLife, PingAn, Prudential Financial, AIG, Generali, Axa and Aviva. All G-SIIs must meet their combined capital requirements from 2019.