The International Association of Insurance Supervisors (IAIS) adopted the global Insurance Capital Standard (ICS) at its annual meeting last week.
This marks a major advancement in insurance supervision as it will enhance financial stability and build a more resilient global insurance sector.
“The adoption of the ICS and these updated standards represent a pivotal moment for the global insurance sector,” Shigeru Ariizumi, IAIS executive committee chair, said. “Taken together they will better safeguard the interests of policyholders and enhance financial stability at a time when a strong and resilient insurance sector is critical to tackling pressing societal challenges.”
The Insurance Capital Standard provides a globally comparable risk-based measure of capital adequacy for internationally active insurance groups (IAIGs). It also forms the quantitative element of the Common Framework for the supervision of internationally active insurance groups.
The ICS will help ensure that IAIGs maintain sufficient capital to withstand potential stresses and thereby protect policyholders. It will also provide a consistent and transparent framework for supervisors to evaluate the financial soundness of IAIGs.
At present, there are 59 IAIGs identified by group-wide supervisors from 18 jurisdictions across the globe. These are often complex groups operating across multiple jurisdictions and regions. This amplifies amplifies the importance of having a common language for solvency supervision.
The specifics of the ICS have been adopted in the Level 1 text setting out the overarching principles and concepts of the ICS, and the Level 2 text providing detailed specifications.
“After a decade of robust development, four consultations, six field-testing exercises and five years of monitoring, I am delighted that the IAIS has adopted the Insurance Capital Standard as a prescribed capital requirement for IAIGs,” Jonathan Dixon, IAIS Secretary General, said. “The ICS is a testament to how collaborative efforts among global supervisors can lead to significant achievements. Despite the complexities and variations in supervisory and market practices across different jurisdictions, we have successfully charted a way forward together in creating a standard that will provide a common language for cross-border supervisory discussions on insurance group solvency in a world where we face many common and interconnected global risks.”
In 2025, the IAIS will begin developing a detailed ICS assessment methodology. Then, in 2026, the IAIS will coordinate a baseline self-assessment by IAIS members of their progress in implementing the ICS. In
2027, the IAIS will initiate detailed jurisdictional assessments of ICS implementation.
U.S. Sen. Tim Scott (R-SC) praised the IAIS decision to protect the U.S. state-based insurance regulatory system and recognize existing capital requirement models.
“The U.S. state-based insurance regulation system has resulted in highly competitive, fair markets across the country for decades and our state insurance regulators – not bureaucrats in Washington or international bodies – are best positioned to oversee insurers and safeguard the interests of consumers,” Scott said. “After over five years of pushing the International Association of Insurance Supervisors to recognize our system as comparable to the Insurance Capital Standard, I’m thrilled to see an outcome that will protect American insurers and consumers.”