Regulators have mapped out the first global plans to force top insurers to hold enough capital, mirroring a well-established framework for banks.

The plans, backed by the G20 group of leading economies, are being developed by the International Association of Insurance Supervisors (IAIS), which represents nearly 140 countries.

Following is a summary of the main elements:

A global Common Supervisory Framework governing insurers will apply from 2019 to cover so-called internationally active insurance groups or IAIGs. Public consultation to start soon.

• IAIGs to be selected on basis of:

  • Premiums written in not fewer than three countries
  • Percentage of gross premiums written outside home country being not less than 10 percent of group total
  • Total assets not less than $50 billion.

• About 50 insurers likely to be included.

A smaller subset group of so-called globally systemically important insurers (GSIIs), of which nine have already been named, face tougher capital requirements.

A global insurance capital standard, the world’s first-ever global capital standard for insurers, will apply to all IAIGs, including GSIIs, from 2019. Will be risk-based, finalized at the end of 2016, then road tested for two years.

• A “backstop” capital requirement will be less risk-based and apply to GSIIs only from 2015 as a check on whether they hold enough capital, akin to the new global leverage ratio for big banks.

Discussion to take place on whether to apply the backstop to all IAIGs.

• A higher loss-absorbency or HLA requirement will replace the backstop capital requirement for GSIIs from 2019, akin to the “capital surcharge” from 2016 for the world’s 28 most systemically important banks.

(Compiled by Huw Jones; Edited by David Holmes)

Topics Carriers