The International Association of Insurance Supervisors (IAIS) has reached a historic milestone by adopting the Insurance Capital Standard (ICS), the first comprehensive global capital framework for supervising internationally active insurance groups (IAIGs). Alongside this, the IAIS introduced significant updates to its Insurance Core Principles (ICPs) and Common Framework (ComFrame), aimed at enhancing climate risk management, resolution frameworks, and valuation practices within the global insurance sector.
This development, announced during IAIS’ Annual General Meeting, represents a significant step forward in strengthening financial stability and ensuring a resilient insurance sector to safeguard policyholders worldwide.
Driving Resilience and Stability
The ICS serves as a risk-based capital adequacy measure, forming the quantitative backbone of ComFrame. It establishes a solvency control level below which supervisors will intervene, ensuring that IAIGs maintain sufficient capital to withstand economic stresses. This standard is pivotal for 59 IAIGs operating across 18 jurisdictions, offering a uniform supervisory language to manage cross-border risks.
IAIS Chair Shigeru Ariizumi emphasized the importance of this advancement:
“The ICS and updated standards are transformative. They strengthen the sector’s ability to address global challenges while prioritizing policyholder protection and financial stability.”
Enhancements to Global Standards
Building on a comprehensive update in 2019, the IAIS has refined its ICPs and ComFrame with targeted updates addressing three critical areas:
Climate Risk Management: Enhanced guidance aligns supervision with climate-related risks, emphasizing sustainable investment and enterprise risk management.
Systemic Risk Mitigation: Updates address liquidity and counterparty risks, contingency funding plans, and recovery frameworks, aligning IAIS standards with global best practices.
Valuation and Capital Adequacy: Refined methodologies ensure consistent valuation of assets, liabilities, and capital resources to support risk-based supervision.
These updates will take effect in 2025, with IAIS members committed to their timely implementation.
A Decade of Collaborative Efforts
Jonathan Dixon, IAIS Secretary General, highlighted the extensive efforts behind the ICS:
“After a decade of collaboration, consultations, and rigorous testing, the ICS sets a common standard for evaluating insurance group solvency. This achievement underscores the value of global cooperation in addressing interconnected risks.”
Implementation Roadmap
The IAIS has outlined a phased implementation plan for the ICS:
1. 2025: Development of an ICS assessment methodology.
2. 2026: Baseline self-assessments by member jurisdictions.
3. 2027: Detailed jurisdictional assessments of ICS adoption.
The U.S. Aggregation Method (AM) will undergo a comparability assessment to align with ICS objectives, ensuring globally consistent outcomes.
Why the IAIS Should Adopt the Insurance Capital Standard (ICS)
Expert insights and real-world case studies underscores the critical importance of adopting the Insurance Capital Standard (ICS) as a robust and globally harmonized framework for insurance regulation. By leveraging these insights and lessons from global experiences, the International Association of Insurance Supervisors (IAIS) can establish the ICS as a cornerstone for fostering a resilient, transparent, and forward-looking insurance sector, ultimately enhancing global economic stability and growth.
The IAIS is a global standard-setting body dedicated to promoting effective and consistent insurance supervision. With over 200 member jurisdictions, it works to maintain fair, stable insurance markets and enhance global financial stability.
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