The International Association of Insurance Supervisors (IAIS) has said that its 2024 focus will be capital requirements and climate risks.
This is according to IAIS’s 2024 Roadmap, which was published last week. The Roadmap outlines the association's work programme.
IAIS is a voluntary membership organisation of insurance supervisors and regulators from more than 200 jurisdictions representing 97% of global premium.
IAIS said its 2023-2024 Roadmap is guided by the IAIS’s 2020-2024 Strategic Plan, which sets out the IAIS High-Level Goals (HLGs) and strategies. IAIS says the Strategic Plan describes how it will maintain its functions of developing global standards, supporting implementation, and contributing to global financial stability, all “while supporting our members in proactively responding to a range of accelerating trends and challenges”.
The organisation set out two key goals for 2024 focused on governance and regulatory synchronicity and addressing climate risks.
“2024 will be a defining year for the global Insurance Capital Standard (ICS), with adoption as a prescribed capital requirement (PCR) for Internationally Active Insurance Groups (IAIGs) in December,” the report said.
The ICS is intended to be a consolidated group-wide capital standard for IAIGs. It consists of three components: valuation, qualifying capital resources, and a standard method for the ICS capital requirement.
"The ICS will provide, for the first time, a common language for cross-border
supervisory discussions on the solvency positions of IAIGs.”
The purpose of the ICS is to create a common language for supervisory discussions of group solvency to enhance global convergence among group capital standards, said IAIS. It added that 2024 marks the “culmination of a 13-year journey”.
“[This journey includes] extensive data collection and analysis, broad global participation from supervisors and insurance groups during the monitoring period and rigorous consultation,” said Jonathan Dixon, IAIS Secretary General. “Once adopted at the IAIS Annual General Meeting of Members, the ICS will provide, for the first time, a common language for cross-border supervisory discussions on the solvency positions of IAIGs.”
IAIS added that alongside feedback from the 2023 public consultation, IAIS is analysing input on the potential economic impact of ICS implementation.
As part of this, the organisation said it will continue its focus on monitoring structural shifts in the life insurance sector, including greater allocation of capital to alternative assets and increased reliance on cross-border asset-intensive reinsurance.
“For asset-intensive reinsurance, the IAIS will examine jurisdictional approaches in capital and collateral requirements, reserving and asset valuation for these reinsurance agreements,” it added.
“The ICS will create a common language for supervisory discussions of group solvency
and enhance convergence amongst group capital standards."
As part of its HLGs, IAIS said it was focused to setting globally recognised standards, looking toward ICS. “The ICS will create a common language for supervisory discussions of group solvency and enhance global convergence amongst group capital standards. In mid-2023, the IAIS launched a public consultation on the ICS as a Prescribed Capital Requirement (PCR).”
It added that their “consultation included additional reporting elements (that is, the Generally Accepted Accounting Principles (GAAP) Plus valuation approach and other methods of calculation of the ICS capital requirement, such as internal models) and whether they should feature in the ICS as a PCR”.
On climate-related risk, a set of consultations was launched in 2023 on good supervisory practices to promote a globally consistent, adequate response to the risks posed by climate change that covered all sectors of insurance consultation.
As part of this, a third consultation will be issued in Q1 2024 covering issues such as valuation and enterprise risk management. IAIS will provide an updated application paper on climate risk, scheduled for finalisation in Q4 2024.
It also said it will highlight the insurance protection gap that exists and is exacerbated by climate risks as well as diversity, equity and inclusion (DEI), and conduct and culture.