There were two immediately obvious takeaways from the recent stakeholder meeting of the International Association of Insurance Supervisors (IAIS) in Macau.
The first was that despite the fact that the current work of the IAIS focuses heavily on larger and global insurers, its effect will be felt by every insurer. The second was that the current work of the IAIS on global risk-based insurance capital standards (ICS) will continue.
But there was one overriding impression that we came away with, as long time observers of the IAIS. This was that both the IAIS and U.S. insurers now get it. For a while, there seemed to be a Cold War between the two sides, with the IAIS presenting what seemed to be a Solvency II-based, Eurocentric insistence on capital as a solution to solvency issues and U.S. insurers and regulators firmly saying no.
While capital remains the primary tool that IAIS plans to use to ensure global insurer solvency, the IAIS demonstrated an apparent new openness to listening to those who had decried its rush to new standards, and its unwillingness to consider the equivalency of current local regimes.
The final result is yet to be seen, but there seemed to be a new spirit of compromise. At this meeting, held to replace the annual meeting of the IAIS — now closed to non-regulators — regulators and insurers from all sides shared views, and agreement certainly seemed more possible than one might have expected given the acrimony shown at the IAIS meeting last fall. It was there that the IAIS announced future annual meetings would be closed to non-regulator stakeholders.
Tone aside, we found at least two items noteworthy. One was the declaration by the IAIS that the Insurance Core Principles (ICPs), which govern the behavior of all insurers and regulators, would be revised to reflect what happened with ComFrame.
Some insurers already understood that what happened with ComFrame and global systemically important insurers (G-SIIs) would trickle down eventually to all. For other insurers who may have thought the IAIS work would only affect a few large companies, this may stimulate an awakening and a needed engagement with the process.
The other item of note was the hoped-for announcement of a delay in the finalization of the ICS. Concern over an aggressive timeframe had been expressed by many from the start, but this concern mounted as rumors of issues with the latest ComFrame field testing arose. Better to get it right then to do it fast — that had been the cry of many stakeholders. However the IAIS had seemed unwaveringly committed to its prior timeframe.
As promised at the meeting, a week later, the IAIS announced an effective delay of at least a year and the implementation of ICS.
As work on solvency continues, insurers concerned about what happens next may find a preview in an application paper and an issues paper just released for consultation by the IAIS. One paper covers market conduct, the other the regulation of captives — the shape of things to come?
This blog entry has been republished with permission.
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