IAIS meeting glimpse: Powerpoints, cap standard concerns, timetables

At the well-attended meeting of the International Association of Insurance Supervisors (IAIS) in Quebec City this week, much talk centered on the development of capital requirements for insurers, from the giant systemically risky insurers to the merely large and globally active ones.

According to notes from observers there on the discussion and  power-point presentations, as the event is not open to the press, the next step for the basic capital requirement (BCR) is to go to the Financial Stability Board (FSB) with a fairly detailed BCR proposal and have that out for early July consultation. It will then go to the FSB again in mid-September with endorsement by the G-20 later.

IAIS Financial Stability Committee Chair Julian Adams who gave a Powerpoint presentation,  according to sources,there is a preliminary BCR formula with a limited number of factors, and beneath each factor is a small number of underlying risk drivers.  The idea is to capture risks on both the asset and liability sides of the balance sheet, Adams was quoted as saying.

According to sources,  most of the designated global systemically important insurers (G-SIIs) have already provided data after  field testing exercises, and it has been analyzed.  Stresses considered include interest rates up and down, equity failure, mortality increase, non-life underwriting stress.

This data is being analyzed now to develop BCR formula.

As for the Global Insurance Capital Standard (ICS), many comments have been received that run the gamut in their delivery and tone, at least.

The multi-national insurers, insurance trade groups and “global elites” almost universally told IAIS members in Quebec City that they are  very concerned about the  2016 deadline for development of the  new capital standards, especially for internationally active insurance groups (IAIGs.) Some observers said any standard should be principle-based, not prescriptive.  Local supervisors should be able to set own standards within a broad principle-based approach, one insurer was quoted as saying during the observer hearing.  Another asked, shouldn’t regulator be focused on policyholder protection?

Insurers at the IAIS also shared major concerns about process and a result of a single standard in Quebec City. These concerns are not new, but a growing number of voices are joining in.

The ICS implementation  itself will come after the IAIS adoption by 2018, in 2019.  It apparently has not been a major topic yet in terms of development work and the ratio involved is still said to be under discussion, as are the principles, according to a presentation by Federal Insurance Office (FIO) Director Michael McRaith, who spoke there.

The stated  goals of the ICS are to avoid inter-jurisdictional capital arbitrage and reduce, long-term the regulator burden on companies.

Many IAIS member-officials delivered Powerpoint presentation of their work to observers.

It was clear that firms are expected to comply with the ICS in 2019.

The IAIS did not immediately provide comments after a request and Treasury declined comment.