Financial Stability
  and Regulation

Regulatory initiatives could affect the global
  insurance industry and its ability to offer adequate
    cover to customers. The Geneva Association studies
      the effects of regulation and strives to ensure that new
        policy measures are developed with due attention to
          insurance customers.

Financial Stability
 and Regulation

Regulatory initiatives could affect the global
  insurance industry and its ability to offer adequate
    cover to customers. The Geneva Association studies
      the effects of regulation and strives to ensure that
        new policy measures are developed with due
          attention to insurance customers.

Financial Stability
and Regulation

Regulatory initiatives could affect the global insurance industry and its ability to offer adequate cover to customers. The Geneva Association studies the effects of regulation and strives to ensure that new policy measures are developed with due attention to insurance customers.

CONSULTATIONS

Over the past year, The Geneva Association responded to IAIS public consultations on the Holistic Framework for Systemic Risk in the Insurance Sector and the Insurance Capital Standard (ICS).

Holistic Framework for Systemic Risk in the Insurance Sector

The IAIS launched in November 2018 a public consultation on the Holistic Framework for Systemic Risk in the Insurance Sector (previously referred to as Activities Based Approach). Around the same time, the Financial Stability Board (FSB) released a statement announcing that while it welcomes the proposed IAIS framework, it would not engage in identifying Global Systemically Important Financial Institutions (G-SIIs) in 2018. The FSB will review in November 2022 whether the IAIS framework is robust enough and decide whether there is a need to discontinue or re-establish the annual identification of the G-SII designation.

In its response to the consultation, The Geneva Association advised the IAIS to clarify how insurers are ‘systemic’ and to reconsider references to the ICS, as this indicator will still be used only for monitoring purposes and not as a prescribed capital standard—at least until 2025.

ICS version 2.0 and Common Framework

As previously announced by the IAIS, the second version of ICS (known as ICS 2.0) will be implemented in two phases. In the first one there will be a five-year monitoring period starting from 2020, during which Internationally Active Insurance Groups (IAIGs) will be subject to mandatory confidential reporting and ICS 2.0 will not be used as a prescribed capital requirement. In the second phase ICS 2.0 will become a prescribed capital requirement.

The ICS 2.0 consultation was launched in July 2018. The Geneva Association and the Institute of International Finance (IIF) produced a joint response, underscoring the purpose of the ICS 2.0 and its potential impact on the ability of the insurance industry to fulfil its societal role in providing protection against risk via long-term insurance products.

The Geneva Association–IIF response +encouraged a transparent governance framework throughout the monitoring period to ensure active stakeholder engagement. The Geneva Association and IIF also highlighted that ComFrame, ICS and other ongoing regulatory initiatives should work as a comprehensive and integrated insurance policy framework.


APPLICATION PAPERS

The International Association of Insurance Supervisors (IAIS) develops application papers to provide supervisors with practical guidance on how to implement IAIS standards on Insurance Core Principles (ICPs), the Common Framework (ComFrame) for the Supervision of Internationally Active Insurance Groups (IAIGs), and policy measures for Global Systemically Important Financial Institutions (G-SIIs).

Supervision of Insurer Cyber Security

In July 2018 the IAIS launched a draft application paper on the supervision of insurer cyber security. In its response, The Geneva Association suggested looking more closely at macro IT trends that confront the insurance industry with new risks and further emphasised the need to agree upon definitions of cyber risks, scenarios and mitigation measures to support the adoption of a risk-based cyber approach.

The Geneva Association recommended producing a follow-up paper that includes a core set of IT preventive and reactive measures with regard to certain types of incidents, such as malware, ransomware and distributed denial of service (DDoS) attacks.

Composition and the Role of the Board

The IAIS draft issues paper of June 2018 intends to provide supervisory authorities with guidance on interpreting and applying the ICPs in two respects: suitability of persons joining the board and corporate governance.

The Geneva Association’s response focused on behavioural aspects of the board’s functioning and warned that the IAIS’s proposed approach could have negative consequences, including a possible shift of decision making away from the boardroom that could hinder open discourse in board meetings. The Geneva Association advised that the proposed approach, particularly with regard to supervisors possibly attending board meetings, is too prescriptive and puts new and far-reaching powers in the hands of supervisors.


CONFERENCE

G20 Insurance Forum

The Geneva Association participated in the G20 Insurance Forum in September 2018 in Bariloche, Argentina. The Association was represented on the panel, Promoting Long-term and Sustainable Investment in Infrastructure, which focused on the role of insurers as institutional investors with approximately USD 24 trillion in assets under management. However, for insurers to invest in asset classes which have a long duration and/or carry greater risks, managing the capital requirements is a key consideration. Therefore, balancing the need for adequate capital charges against allowing insurers greater scope to invest in new assets classes has become an increasingly important consideration for insurance regulators and insurers alike.

G20 Insurance Forum in Bariloche, Argentina - Juan Pazo, Superintendent of Insurance, Argentina; Toyonari Sasaki, Vice chairman, Life Insurance Association of Japan; José Cardoso, President, Brazilian Reinsurance Institute; Adrián Werthein, Chairman, Experta ART; Alejandro Simón, CEO, Sancor Seguros and member of The Geneva Association’s Board


35th Regulation and Supervision (Progres) Seminar

The PROGRES Seminar, which took place in Zurich on 28 February - 1 March 2019, brings together leading representatives of the global insurance industry, regulators, standard setters, academics and members of non-governmental organisations to discuss key issues facing the insurance industry.

Insurers are confronted with higher expectations from stakeholders to play a role in addressing societal challenges such as climate change, poverty, social unrest and quality of infrastructure. By pricing the risks involved and embracing sustainable investment practices, insurers can help to influence behaviors that contribute to meeting societal goals.

More than a decade after the 2008 global economic meltdown, the post-crisis reforms of the IAIS are near completion. There is a need to discuss the impact of initiatives such as ICS and Holistic Framework to Systemic Risk, as well as other issues in the run up to implementation. These approaches must observe local and regional differences and consider that insurance does not create systemic risk but absorbs it.

While the intent of some regulatory measures is to provide metrics that allow for comparable outcomes across geographies, their implementation affects insurance customers. For example, debate still looms as to whether certain standards may disincentivize investments and force insurers to withdraw certain long-term life insurance products.

Economic growth ought to be inclusive and create resilience. But should this premise be part of insurance supervisors’ mandate? As the regulatory framework defines the boundaries of what insurers can do, regulators and supervisors play a crucial role in enabling the insurance industry to contribute to advancing inclusiveness and resilience whilst observing policyholder protection and financial stability.

Participants in the 35th PROGRES Seminar


Suzette Vogelsang, Head Banking, Insurance and FMI Supervision Department, South African Reserve Bank


CEO panel on social responsibilities of insurers – Vicky Saporta (moderator), IAIS; Charles Brindamour, Intact Financial; Joachim Wenning, Munich Re; Denis Duverne, AXA; Alexander Wynaendts, Aegon


Panel on inclusive growth and resilience - Jonathan Dixon (moderator), IAIS; Hannah Grant, Access to Insurance Initiative; Anderson Caputo Silva, World Bank; Grace Mohamed, Namibia Financial Institutions Supervisory Authority; Tom Gitogo, CIC Insurance; Ekhosuehi Iyahen, Insurance Development Forum


Denis Duverne, Chairman, AXA

Fireside chat on Brexit - Miles Celic (moderator), The City UK; Nicolas Veron, Bruegel; Karel Lannoo, CEPS