Now that the European Union’s Solvency II is nearing its Jan. 1, 2016 effective date, you’d think some clear road might be ahead allowing insurance executives time to adjust to the landscape. Instead, we find ourselves in the middle of a great debate about development of an international insurance capital standard (ICS) directed by the International Association of Insurance Supervisors (IAIS). Executive Summary Solvency II has always been a stepping stone to something else—the supervisory desire for a global international solvency standard, writes ABIR President Bradley Kading. In this opinion piece, Kading lays out what ABIR sees as a pragmatic way to pave the way for an ICS as part of ComFrame.
The ICS would apply to the top 50 largest global insurance groups and would have to be enacted into jurisdictional law in order to take effect.
Solvency II is a necessary regional standard; its original developers were ahead of their time, just as the NAIC led the way with its groundbreaking risk-based capital work 25 years ago. Indeed, the best elements of Solvency II already have made it into a global model. Mandatory stress testing, ORSA (ERM) requirements, group supervision, regulatory colleges, economic capital options, risk-based assessment of capital all are good, common-sense elements.