On 17 December 2014, the International Association of Insurance Supervisors (IAIS) published a consultation paper on a risk-based global insurance capital standard (ICS). The consultation paper is the first step in a multi-year process to develop and finalise the ICS for internationally active insurance groups (IAIGs) and global systemically important insurers (G-SIIs). The IAIS will publish a separate consultation paper document on higher loss absorbency requirements for G-SIIs in 2015.
The purpose of the consultation paper is to solicit feedback from stakeholders on the proposed ICS. This includes feedback on valuation, qualifying capital resources, an example of a standard method for determining the ICS capital requirement as well as exploration of potential other methods for determining the ICS capital requirement.
The IAIS says that as the ICS is a group-wide, consolidated insurance capital standard applicable to IAIGs and G-SIIs, the domestic context of the jurisdiction in which the IAIG or G-SII is located or domiciled is much less relevant. All IAIGs and G-SIIs will be shaped by the jurisdiction in which they are headquartered but by their very nature they are multi-national entities with stakeholders outside of the domestic location or domicile context.
By virtue of the fact that the ICS is a group-wide, consolidated insurance capital standard, it is not intended as a legal entity requirement and is not intended to affect or replace existing arrangements or capital standards for legal entity supervision in any jurisdiction. If a jurisdiction references the ICS in the development of its domestic solvency framework that is the choice of that jurisdiction.
Once finalised and agreed, the ICS will be a measure of capital adequacy for IAIGs and G-SIIs. It will constitute the minimum standard to be achieved and one which the supervisors represented in the IAIS will implement or propose to implement taking into account specific market circumstances in their respective jurisdictions.
Page 6 of the consultation paper contains a timetable for developing the ICS. It is due to be finalised by the end of 2016, with testing taking place throughout 2015.
Comments are requested by 16 February 2015. These should submitted using a consultation tool, which will be available from 7 January 2015.