In light of the fact that there is no international insolvency framework for insurance entities and very few practical examples of successful resolutions, the International Association of Insurance Supervisors (“IAIS”) has published a paper identifying the issues involved in the winding up of cross border insurance entities/groups aimed at encouraging international discussion on the resolution of complex cross-border insurance insolvencies/restructurings. The paper can be viewed here.
A major objective of the IAIS is to develop by-laws to contribute to the broader stability of the financial system. IAIS Insurance Core Principle 16 covers the winding up of insurance entities. The issues paper highlights the areas necessary to be explored in order to flesh out ICP16, undertaking a preliminary exploration of the issues whilst recognising a need for further analysis and consideration within the IAIS and internationally. The paper highlights the main causes of non-viability of insurance entities, the major challenges to the successful resolution of non-viable cross-border insurance entities and the different approaches to resolution together with areas of conflict that currently present obstacles to successful resolutions.
The paper does not put forward solutions but identifies key areas that need to be explored in order to enable the satisfactory resolution of non-viable cross-border insurance entities: the harmonisation of restructuring and insolvency laws; the acknowledgement and recognition of other insolvency laws and regulations in various jurisdictions; insurance regulation and supervision in any insolvency/restructuring context; cross-border co-operation, including supervisory and crisis colleges and plans; ring-fencing; consistent priority to be given to the policy holder; and necessary licensing. The paper also briefly compares resolution frameworks in Australia, Canada, Japan, Switzerland, the UK and the US and provides an overview of two case studies.