Consultation on policy measures for G-SIIs

On 17 October 2012, the International Association of Insurance Supervisors (“IAIS”) published a consultation on proposed policy measures for global systemically important insurers (“G-SIIs”), which are insurers whose distress or failure could cause significant disruption to the global financial system.

The proposed policy measures are divided into three categories:

  • enhanced supervision: these measures are based on the IAIS’ existing Insurance Core Principles, the Financial Stability Board’s supervisory intensity and effectiveness recommendations and the IAIS common framework for the supervision of internationally active groups; special attention should be paid to group-wide supervision and each G-SII should develop a systemic risk reduction plan;
  • effective resolution: this should involve consideration of the plans and steps needed to separate traditional insurance activities from non-traditional and non-insurance activities, the possible use of portfolio transfers and run-off arrangements in the resolution of entities conducting traditional insurance activities, and the existence of policyholder protection and guarantee schemes; and
  • higher loss absorption capacity: this should reduce the probability of failure, so the IAIS proposes a cascading approach taking into account the extent to which the G-SII has demonstrated effective separation between traditional insurance activities and non-traditional or non-insurance activities.

It is expected that the first cohort of G-SIIs will be designated and made public in the first half of 2013. Measures on enhanced supervision and effective resolution are to be implemented immediately afterwards, with full implementation to be completed within 18 months of designation.

It is worth noting that the European Commission has also published a consultation on a possible recovery and resolution framework for non-bank financial institutions, which includes insurance and reinsurance firms.

The deadline for comments on the IAIS consultation is 16 December 2012 and the deadline for comments on the European Commission consultation is 28 December 2012.

Global Insurance Market Report

The IAIS has published its first Global Insurance Market Report, documenting the performance of primary insurers and reinsurers as well as key developments in the global insurance market. This report aims to give IAIS members and other interested parties a full and thorough understanding of the global insurance marketplace by providing an analysis of both publicly available and confidential data. The report shows that insurers and reinsurers have been affected by the financial crisis and subsequent recession but that the industry has been resilient and there is evidence that insurers and reinsurers are now better capitalised than they were at the beginning of the crisis.

Although this first edition of the report is based on a comparatively small sample of 20 globally active insurers and reinsurers as well as confidential data collected from 48 large global reinsurers, the IAIS intends to increase the sample size for future editions of the report.

Further editions of the report are currently scheduled to be released on a biannual basis, starting in spring 2013.