IAIS Announces Systemic Risk Assessment and Policy Work Plan

The International Association of Insurance Supervisors (IAIS) has announced it is developing an activities-based approach to systemic risk assessment in the insurance sector. To put this into effect, the IAIS has adopted a systemic risk assessment and policy work plan. The work plan consists of a logical sequence of planned activities.

"This well-articulated work plan will allow the IAIS to develop a comprehensive framework for the assessment and mitigation of systemic risk, building on the work carried out so far," stated Victoria Saporta, chair of the IAIS Executive Committee.

Ms. Saporta added: "The work plan will further allow the IAIS to take into account systemically risky activities in the development of ComFrame and, in particular, the Insurance Capital Standard (ICS) and to apply a revised higher loss absorbency (HLA) requirement, based on ICS Version 2.0, to any global systemically important insurers (G-SIIs) identified based on the revised 2019 G-SII systemic risk assessment methodology. Importantly, it places the IAIS focus on developing the ICS at center stage."

The work plan consists of the following elements.

1. Developing an activities-based approach (assessment of potential systemically risky activities) at the insurance sector level.
2. Finalizing any policy measures to address such potential systemically risky activities as part of ComFrame (including ICS Version 2.0) to be adopted in 2019.
3. As part of the regular 3-year cycle, releasing the revised 2019 systemic risk assessment methodology for public consultation by year-end 2018, with adoption in 2019. The 2019 systemic risk assessment methodology will be applied starting from 2020.
4. Basing the planned revisions to higher loss absorbency (HLA) capacity requirements on Insurance Capital Standard (ICS) Version 2.0 scheduled for adoption in late 2019, rather than on the predecessor Basic Capital Requirement. The HLA revisions will occur following the adoption of the revised 2019 systemic risk assessment methodology. The HLA will be implemented beginning in 2022, once revised, and apply to any G-SIIs identified in 2020.

For more information on the systemic risk assessment and policy work plan, see "Frequently Asked Questions for IAIS Financial Stability and Macroprudential Policy and Surveillance (MPS) Activities."