Global insurance watchdog releases rules for globally important insurers

BASEL – The International Association of Insurance Supervisors (IAIS) has released the higher loss absorbency (HLA) requirement for global systemically important insurers (G-SIIs).

The Financial Stability Board endorsed the HLA regulations.

IAIS executive committee chairman Felix Hufeld said the IAIS has met a major milestone in its commitment to address risks to the global financial system from systemically important insurers.

“The IAIS considers a sound capital and solvency framework for the insurance sector to be essential for supporting financial stability and we look forward to completing our next goal of developing ComFrame as a comprehensive, group-wide supervisory and regulatory framework for Internationally Active Insurance Groups (IAIGs),” Hufeld said.

Implementation starts this year, with completion ending 2019.

The HLA will be reported on a confidential basis to group-wide supervisors and shared with the IAIS for purposes of improving the HLA. The basic capital requirements (BCR) has similarly been reported beginning in 2015.

The IAIS plans to annually review the design and calibration of the HLA and BCR and recommend any necessary changes.

It will also make any refinements necessitated by changes to the G-SII assessment methodology and the definitions of non-traditional and non-insurance activities, both of which will be the subject of public consultations later this year.

The development of the HLA is the second step of a long-term project to develop risk-based, group-wide global insurance capital standards.

The first step was the development of BCR requirements in 2014. The third step is the development of a risk-based group-wide global Insurance Capital Standard (ICS), due to be adopted by the end of 2019.

The IAIS is a global standard setting body to promote 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.

Its membership includes insurance regulators and supervisors from more than 200 jurisdictions in nearly 140 countries.