Other parts of this series:
- North American insurers face international capital standards
- Several tough challenges for too-big-to-fail insurers
- Potential changes in capital standards could affect largest, international carriers
- Some capital standards deadlines missed, others are ambitious
- How insurers should respond to international capital standards
In my blog series on the draft international standards on capital adequacy that North American as well as global insurers face, I have not been precise about the implementation dates of some important provisions. That’s because they are ambitious and uncertain, as Accenture notes in its report, “The Rise of Global Standards and How Insurers Can Comply.”
Consider, for example, a few provisions applicable to Global Systemically Important Insurers (G-SIIs). These are the nine US, European and Asian insurers considered too big to fail, because an insolvency of any of them would pose a systemic risk to the global financial system. The measures covering the enhanced supervision of these insurers—such as the development of their Systemic Risk Management Plans—should have been implemented by now. Additionally, measures dealing with the effective resolution of an insolvency of a G-SII should have been developed and agreed to by crisis management groups by year-end 2014. And the plan was to begin applying the Basic Capital Requirement to G-SIIs in January 2015.
Although the FSB updated the list of designated G-SIIs on Nov. 3, the International Association of Insurance Supervisors (IAIS) continues to postpone its decision about whether to include some reinsurers in its list of G-SIIs. Even if the IAIS does not believe their traditional insurance activities would generate or amplify systemic risk, a question remains about whether their noninsurance activities—such as writing collateralized debt securities or credit default swaps—could. A decision awaits further study and analysis.But the timeline for these resolution requirements is not yet carved in stone. The G20’s Financial Stability Board (FSB) recently sought further feedback on its guidance to assist supervisory authorities in developing effective resolution for failed insurers. The current consultation notably focuses on the points at which supervisors should intervene—or the identification of the “point of entry” for an entity; the identification of “critical” insurance functions; and a set of more operational issues.
As I noted in my previous post, the IAIS also postponed the deadline for ICS implementation and instead laid out a step-by-step approach to its development. A first version of the standard, ICS 1.0, would allow for the two main balance-sheet valuation approaches: market-adjusted and GAAP+. The second version, ICS 2.0, is largely undetermined at this stage. ICS 1.0 would be delivered in May or June 2017 instead of December 2016, and ICS 2.0 would be pushed back to 2019 from 2018. The implementation periods following the delivery of the standards is yet unknown.
To learn more about the study, read “The Rise of Global Standards and How Insurers Can Comply.”
Next time: How insurers should respond