IAIS introducing risk-based capital standards by 2016

MANILA, Philippines - The International Association of Insurance Supervisors (IAIS) is planning to develop a risk-based global insurance capital standard (ICS) by 2016.

Full implementation will begin in 2019 after two years of testing and refinement with supervisors and internationally active insurance groups (IAIGs).

The IAIS is a voluntary membership organization of insurance supervisors and regulators from more than 200 jurisdictions in nearly than 140 countries. In addition to its members, more than 130 observers representing international institutions, professional associations and insurance and reinsurance companies, as well as consultants and other professionals participate in IAIS activities.

The IAIS promotes effective and globally consistent supervision of the insurance industry in order to develop and maintain fair, safe and stable insurance markets for the benefit and protection of policyholders and to contribute to global financial stability.

IAIS Executive Committee chairman Peter Braumuller said that the business of insurance is global, and global issues demand global responses.

“This is why the IAIS, whose members constitute nearly all of the world’s insurance supervisors, has committed to develop and implement the first-ever risk based global insurance capital standard,”
Baumuller added in a statement.

In 2010, the IAIS began developing a comprehensive framework for the supervision of IAIGs, or ComFrame. The IAIS has now agreed to develop a risk based global ICS and to include it within ComFrame, which has always included a capital component within its solvency assessment.

This component, which is being finalized in concept, will be used as a starting point for development of the ICS.

Next year, the IAIS will also develop straightforward, backstop capital requirements (BCRs), which are planned to be finalized and ready for implementation by global systemically important insurers (G-SIIs) in late-2014.

BCRs will serve as the foundation for higher loss absorbency (HLA) requirements for G-SIIs, and it is anticipated that their development and testing will also inform development of the ICS. 



In a separate statement, IAIS Technical Committee chairman Michael T. McRaith explained that the recent financial crisis clearly pointed out that global financial regulatory regime should be more robust and comprehensive in scope, and jurisdictions should share a commitment to global standards.

This commitment follows the IAIS’ announcement in July that it considers a sound capital and supervisory framework for the insurance sector essential for supporting financial stability and protecting policyholders. 


The IAIS said that the development of a risk-based capital standard for global insurance groups has been established as a priority as part of its work to promote financial stability.