A.M. Best has expressed some doubt that a tight timeline to finalize and launch insurance industry international capital standards can actually be met. That’s due, in part, to a “scarcity of common ground.”
The International Association of Insurance Supervisors, a Swiss-based group of regulators from nearly 140 countries, plans to finalize international minimum capital standards by December 2016. IAIS officials also hope to win membership adoption of those standards by the end of 2018. But A.M. Best sees those deadlines as questionable.
That timeline is “ambitious due to the scope of developing and implementing a global capital standard from the current multifaceted and varying accounting, valuation and regulatory frameworks that exist across many jurisdictions,” A.M. Best said.
The ratings entity added that “the current level of resources and scarcity of common ground or alternative proposals could be a significant headwind to the current timeline” for putting insurance industry international capital standards in motion.
A.M. Best noted that the tight deadline could revolve around sealing a deal soon “on key technical issues.” If that doesn’t happen, A.M. Best said it could leave insurers with little time to vet and field test changes in credit, underwriting and investment that would be needed in the face of new capital standards.
“Companies must continue to follow these IAIS-related developments as they occur, and take advantage of the communication that the IAIS offers as the progression toward a global standard continues,” A.M. Best said.
A.M. Best isn’t alone in lowering expectations for speedy implementation of international capital standards.
Speaking at an event in Washington D.C. on March 17, Federal Insurance Office Director Michael McRaith said that insurers could see some version of an international capital standard by 2016. He added, however, that the change would be incremental rather than industry changing.
“The first objective of 2016 is to complete some … primitive version of the international capital standard, [but the] expectation is that it will not be a final magical formula,” McRaith said during the Networks Financial Institute 11th Annual Insurance Public Policy Summit on March 17. “We will move one step forward to the ultimate goal.”