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1
The IAIS proposal of a
Global Insurance Capital Standard
Falco Valkenburg
Lisboa, 23 March 2015
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Mission IAIS
The mission of the IAIS is
to promote effective and globally consistent supervision
in order to develop and maintain fair, safe and stable
insurance markets
for the benefit and protection of policyholders and
to contribute to financial stability.
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G-SIIs
Globally Systemically Important Insurers = G-SIIs
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G-SIIs
List was reconfirmed on 6 November 2014
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G-SIIs: Policy Measures
Enhanced Supervision
– Systemic Risk Management Plan
– Enhanced Liquidity Planning and Management
– Group-wide supervisor has direct power over holding companies
Effective Resolution
– Crisis Management Groups
– Elaboration of recovery and resolution plans
– Resolvability Assessments
– Institution-specific cross-border cooperation agreements
Higher Loss Absorption (HLA) Capacity
– Straightforward, backstop capital requirements
– Published end of 2014
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Global Insurance Capital Standard
IAIS’ work doesn’t stop with G-SII …
Developing a credible and coherent global insurance regime
By 2020
– Enhanced standards of global insurance supervision and
cooperation
– Quantitative Capital Standards for IAIGs
• IAIG = Internationally Active Insurance Group (approx. 50 groups)
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Basic Capital Requirements (BCR)
BCR developed on the bais of 6 principles:
Substantive principles
Principle 1: Major risk categories should be reflected
Principle 2: Comparability of outcomes across jurisdictions
Principle 3: Resilience to stress
Construction principles
Principle 4: Simple design and presentation
Principle 5: Internal consistency
Principle 6: Optimise transparency and use of public data
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BCR: some comments
Based on local best estimates
Discount rate
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High Loss Absorbency (HLA)
Six Substantive principles (relevant over long time frame)
1. Comparability
2. G-SII risks
3. Internalise costs
4. Resilient
5. Going concern
6. Quality of capital
Four Construction principles (more short term guidance)
7. Pragmatic
8. Consistent
9. Transparent
10.Refinement
To be developed by 2015
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ICS Principles (first 5 of 10)
1. Consolidated group-wide standard with a globally comparable risk-
based measure of capital adequacy for IAIGs and G-SIIs
2. Protection of policyholders and contributing to financial stability
3. Foundation for HLA for G-SIIs
4. Reflects all material risks to which an IAIG is exposed
5. Aims at comparability of outcomes across jurisdictions and therefore
provides increased mutual understanding
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ICS Principles (second 5 of 10)
6. Promotes sound risk management by IAIGs and G-SIIs
7. Promotes prudentially sound behaviour while minimising inappropriate
procyclical behaviour by supervisors and IAIGs
8. Strikes an appropriate balance between risk sensitivity and simplicity
9. Transparent, particularly with regard to the disclosure of final results
10. Capital requirement based on appropriate target criteria which underlie
the calibration
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Next steps
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Falco Valkenburg
Independent Actuary
Chairperson Pensions Committee of the Actuarial Association of Europe
M +31 (0)6 22 78 50 29
W www.falcovalkenburg.eu
Skype frvalkenburg
Twitter @FalcoValkenburg
LinkedIn: nl.linkedin.com/in/falcovalkenburg