Insurance Core Principles, Standards, Guidance and Assessment Methodology

14 November 2019

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The ICPs are the highest level in the hierarchy of IAIS supervisory material and prescribe the essential elements that must be present in the supervisory regime in order to promote a financially sound insurance sector and provide an adequate level of consumer protection. Standards are directly under the ICPs in the hierarchy of IAIS supervisory material. Standards are linked to specific ICPs and set out key high-level requirements that are fundamental to the implementation of the insurance core principles and should be met for a supervisory authority to demonstrate observance with the core principles. Guidance material typically supports the core principles and/or standards and provides detail regarding how to comply with or implement a core principle or a standard. Guidance material does not set out new requirements but rather describes what is meant by the requirement.

 The ICPs were first issued on 1 October 2011. Individual core principles, with related standards and guidance, were amended in subsequent years to reflect best practices, address changes to the insurance sector and supervisory requirements, align them with standards from other standard setting bodies, as well as to incorporate findings generated by the IAIS’ feedback loop between implementation activities and standard setting.

 In November 2019, the IAIS completed the multi-year process for reviewing and revising the Insurance Core Principles (ICPs).

Assessment Methodology

View the Assessment Methodology

The Assessment Methodology is included in the Insurance Core Principles document. It was issued by IAIS on 1 October 2011 and amended in November 2019. Assessment of a jurisdiction’s observance of the ICPs can facilitate effective implementation by identifying the extent and nature of strengths and weaknesses in a jurisdiction’s supervisory framework – especially those aspects that could affect policyholder protection and financial stability.

Assessments against the ICPs can be conducted in a number of contexts including:

  • self-assessments performed by the jurisdiction itself. These may be performed with the assistance of outside experts and/or followed by peer review and analysis;

  • reviews conducted by third parties; or

  • reviews in the context of the Financial Sector Assessment Program (FSAP) conducted by the International Monetary Fund (IMF) and World Bank

FSB report highlights need to address remaining resolution gaps

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Ref no: 41/2019

The Financial Stability Board (FSB) today published its 2019 Resolution Report. The report provides an update on progress in implementing policy measures to enhance the resolvability of systemically important financial institutions and sets out plans for further work. The report concludes that authorities and firms need to be mindful of any remaining gaps as they work towards making resolution strategies and plans operational in all sectors.

  • Central Counterparties (CCPs) – A policy priority for the FSB is the further strengthening of the resilience and resolvability of CCPs. Its continuing work on financial resources and tools to support orderly resolution will lead to further guidance, on which the FSB will publicly consult during the second quarter of 2020.

  • Banks – Global systemically important banks have been made more resolvable through the build-up of total loss-absorbing capacity (TLAC) and other measures. Notwithstanding this progress, challenges remain. Authorities need to determine the appropriate balance between group-internal distribution of TLAC and non-pre-positioned resources; and access to temporary liquidity in the relevant currencies and in adequate amounts when and where needed by firms going through resolution requires ex ante preparation by firms and authorities.

  • Insurance – Resolvability monitoring in the insurance sector highlighted in particular challenges stemming from group-internal interconnectedness.

Speaking about today’s publication, Mark Branson, Chair of the FSB Resolution Steering Group and Chief Executive Officer of the Swiss Financial Market Supervisory Authority FINMA, said: “We have made significant progress in increasing resolvability, but the progress is uneven across sectors. The critical importance of CCPs to the overall safety and soundness of the financial system means that authorities must ensure that CCPs do not themselves become a source of systemic risk or contagion and that any systemically important CCP can be successfully resolved without resort to a government “bailout”. Beyond CCPs, remaining gaps that could affect the effective execution of resolution plans, either at a statutory level or in firms’ operational capabilities, also need to be closed. Continued monitoring of progress by the FSB through its resolvability assessment process for systemic institutions remains crucial.”

Notes to editors

The FSB Resolution Steering Group leads the FSB’s work on resolution regimes, resolution planning and resolvability assessments for all sectors and developed the FSB’s Key Attributes of Effective Resolution Regimes for Financial Institutions.

The FSB coordinates at the international level the work of national financial authorities and international standard-setting bodies and develops and promotes the implementation of effective regulatory, supervisory, and other financial sector policies in the interest of financial stability. It brings together national authorities responsible for financial stability in 24 countries and jurisdictions, international financial institutions, sector-specific international groupings of regulators and supervisors, and committees of central bank experts. The FSB also conducts outreach with approximately 70 other jurisdictions through its six Regional Consultative Groups.

The FSB is chaired by Randal K. Quarles, Governor and Vice Chairman for Supervision, US Federal Reserve; its Vice Chair is Klaas Knot, President, De Nederlandsche Bank. The FSB Secretariat is located in Basel, Switzerland, and hosted by the Bank for International Settlements.

2019 Resolution Report: “Mind the Gap”

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This resolution report provides an update on progress in implementing policy measures to enhance the resolvability of systemically important financial institutions and sets out plans for further work. The report concludes that authorities and firms need to be mindful of any remaining gaps as they work towards making resolution strategies and plans operational in all sectors.

  • Central Counterparties (CCPs) – A policy priority for the FSB is the further strengthening of the resilience and resolvability of CCPs. Its continuing work on financial resources and tools to support orderly resolution will lead to further guidance, on which the FSB will publicly consult during the second quarter of 2020.

  • Banks – Global systemically important banks have been made more resolvable through the build-up of total loss-absorbing capacity (TLAC) and other measures. Notwithstanding this progress, challenges remain. Authorities need to determine the appropriate balance between group-internal distribution of TLAC and non-pre-positioned resources; and access to temporary liquidity in the relevant currencies and in adequate amounts when and where needed by firms going through resolution requires ex ante preparation by firms and authorities.

  • Insurance – Resolvability monitoring in the insurance sector highlighted in particular challenges stemming from group-internal interconnectedness.

FSB welcomes insurance holistic framework

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Ref no: 40/2019

The Financial Stability Board (FSB) today welcomed the finalisation and publication of the International Association of Insurance Supervisors’ (IAIS) Holistic Framework for Systemic Risk in the Insurance Sector, for implementation in 2020. 

The key elements of the framework are:

  • An enhanced set of supervisory policy measures for macroprudential purposes, designed to increase the overall resilience of the insurance sector and help prevent insurance sector vulnerabilities and exposures from developing into systemic risk, through ongoing supervisory requirements applied to insurers, enhanced macroprudential supervision and crisis management and planning; and where a potential systemic risk is detected, supervisory powers of intervention that enable a prompt and appropriate response. Supervisors are required to have at their disposal a sufficiently broad set of preventive and corrective measures to be able to respond appropriately based on the nature of the macroprudential concern.

  • A global monitoring exercise by the IAIS designed to assess global insurance market trends and developments and detect the possible build-up of systemic risk in the global insurance sector. This includes an annual assessment by the IAIS of potential systemic risk arising from sector-wide trends with regard to specific activities and exposures, but also the possible concentration of systemic risks at an individual insurer level (using an updated assessment methodology) arising from these activities and exposures.

  • Mechanisms to allow for a collective assessment of potential global systemic risk and a coordinated supervisory response when needed. This involves, at an individual insurer and sector-wide level: i) A collective discussion by the IAIS of the assessment of potential systemic risks and appropriate supervisory responses; and ii) Reporting to the FSB on the outcomes of the global monitoring exercise, including the IAIS assessment of global systemic risk and the supervisory response to identified risks (if any).

  • An assessment by the IAIS of the consistent implementation of the enhanced supervisory policy measures and powers of intervention.

In light of the finalised holistic framework, the FSB, in consultation with the IAIS and national authorities, has decided to suspend Global Systemically Important Insurers (G-SII) identification as from the beginning of 2020.

In November 2022, the FSB will, based on the initial years of implementation of the holistic framework, review the need to either discontinue or re-establish an annual identification of G-SIIs by the FSB in consultation with the IAIS and national authorities.

The FSB will receive from the IAIS an annual update of the outcomes of the global monitoring exercise, including the IAIS assessment of systemic risk in the global insurance sector and the supervisory response to identified risks (if any). The IAIS will continue its annual data collection from individual insurers, complemented by data collection from supervisors to support its assessment of sector-wide trends with regard to specific activities and exposures.

Notes to editors

The FSB coordinates at the international level the work of national financial authorities and international standard-setting bodies and develops and promotes the implementation of effective regulatory, supervisory, and other financial sector policies in the interest of financial stability. It brings together national authorities responsible for financial stability in 24 countries and jurisdictions, international financial institutions, sector-specific international groupings of regulators and supervisors, and committees of central bank experts. The FSB also conducts outreach with approximately 70 other jurisdictions through its six Regional Consultative Groups.

The FSB is chaired by Randal K. Quarles, Governor and Vice Chairman for Supervision, US Federal Reserve; its Vice Chair is Klaas Knot, President, De Nederlandsche Bank. The FSB Secretariat is located in Basel, Switzerland, and hosted by the Bank for International Settlements.

Common Framework for the Supervision of Internationally Active Insurance Groups

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The Common Framework for the Supervision of Internationally Active Insurance Groups (ComFrame) establishes supervisory standards and guidance focusing on the effective group-wide supervision of Internationally Active Insurance Groups (IAIGs).

ComFrame is a comprehensive and outcome-focused framework aimed at facilitating effective group-wide supervision of IAIGs, by providing qualitative and (in a future phase) quantitative supervisory minimum requirements tailored to the international activity and size of IAIGs. This should help supervisors address group-wide risks and avoid supervisory gaps. One of the main objectives of ComFrame is to support coordination of supervisory activities between the group-wide supervisor (GWS) and other involved supervisors. As such, ComFrame will provide supervisors with a common language for the supervision of IAIGs.

By coordinating supervisory activities and exchange of information about IAIGs between group-wide and other involved supervisors, the implementation of ComFrame should result in more efficient supervisory processes, for the benefit of both supervisors and IAIGs.

ComFrame builds on, and expands upon, the high-level standards and guidance currently set out in the Insurance Core Principles (ICPs), which generally apply on both an insurance legal entity and group-wide level.

Assessment Methodology

View the Assessment Methodology

The ComFrame Assessment Methodology is included in the Insurance Core Principles and ComFrame document. It was issued by IAIS in November 2019.

In general, the assessment methodology described for the ICPs is applicable to ComFrame. However, given the nature of ComFrame, which provides quantitative and qualitative supervisory requirements tailored to the international activity and size of IAIGs, there are some additional considerations provided in the ComFrame Assessment Methodology, which should be taken into account when assessing observance of ComFrame requirements.

Holistic Framework for the assessment and mitigation of systemic risk in the insurance sector (“Holistic Framework“)

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The holistic framework is an integrated set of supervisory policy measures, a Global Monitoring Exercise, and implementation assessment activities.

  • Supervisory material: an enhanced set of supervisory policy measures for macroprudential purposes, designed to increase the overall resilience of the insurance sector and help prevent insurance sector vulnerabilities and exposures from developing into systemic risk. When a potential systemic risk is detected, supervisory powers of intervention enable a prompt and appropriate response. The holistic framework related supervisory material is integrated into the ICPs and ComFrame.

  • Global Monitoring Exercise: the IAIS Global Monitoring Exercise (GME) is designed to assess global insurance market trends and developments and detect the possible build-up of systemic risk in the global insurance sector. This includes, at an individual insurer and sector-wide level, a collective discussion at the IAIS on the assessment of potential systemic risks and appropriate supervisory responses and reporting to the Financial Stability Board (FSB) on the outcomes.

  • Implementation assessment: an IAIS assessment of the consistent implementation of enhanced supervisory policy measures and powers of intervention.

Assessment Methodology

Handbook for Assessing Implementation of IAIS Supervisory Material (June 2017)

Implementation assessment is an integral part of the holistic framework. The assessment of implementation is based on the assessment methodology of the ICPs and ComFrame

Application Paper on Recovery Planning

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The Application Paper on Recovery Planning provides guidance with respect to supervisory material related to recovery planning in the Insurance Core Principles (ICPs) and the Common Framework for the Supervision of Internationally Active Insurance Groups (ComFrame). In particular, it is related to the material in ICP 16.15 and ComFrame 16.15.a and 16.15.b (ICP 16 Enterprise Risk Management for Solvency Purposes), and is also relevant to supervisory cooperation and coordination arrangements set out in ICP 23 (The Group-wide Supervisor) and ICP 25 (Supervisory Cooperation and Coordination).

The Application Paper addresses issues that were identified in the development of this material, including feedback received from members and stakeholders during public consultations. The issues involved both the nature of a recovery plan, and the roles of the supervisor and insurer with respect to the plan. Subjects that were identified included:

  • The relationship between recovery plans and enterprise risk management (ERM) tools, including Own Risk and Solvency Assessment (ORSA), contingency plans and other preventive or corrective measures;

  • The circumstances in which it is appropriate for the supervisor to require a recovery plan; and

  • The implementation of the proportionality principle with respect to a recovery plan.

FSB Europe group discusses regional vulnerabilities, stablecoins, financial benchmark reform and crisis simulations

12 November 2019

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Ref no: 39/2019

The Financial Stability Board (FSB) Regional Consultative Group (RCG) for Europe met in Basel today.

Members discussed global and regional financial vulnerabilities, including the challenges posed by subdued economic growth in Europe, a persistent search for yield and continued pressures on the profitability of European banks. They also discussed the risks from elevated debt levels for many private and public sector borrowers in an environment where interest rates are expected to remain “lower for longer” globally.

The group discussed the wide range of regulatory and supervisory issues raised by stablecoins of potentially global reach, and looked forward to the public consultation report on regulatory issues of stablecoins to be published by the FSB in April 2020. Members also discussed current shortcomings of cross-border payment systems and how these might be addressed.

Members then discussed reform of major interest rate benchmarks. The group underlined the importance of financial institutions being prepared for the possible end of LIBOR once official sector support for the benchmark is withdrawn at end-2021, and changes to other benchmarks. They noted that authorities remain committed to these transitions and expect firms to take appropriate steps to ensure smooth transitions. They discussed the findings of the progress report the FSB will publish on benchmark reform next month.

Members received an update on the FSB’s ongoing work and its plans for 2020 which were discussed at the FSB Plenary last week. As part of this update, RCG members received an update on the FSB’s ongoing evaluation of too-big-to-fail reforms for systemically important banks.

The group discussed a joint financial crisis management exercise that had been conducted by Nordic and Baltic authorities in January 2019 to test their preparedness for a financial crisis. Members that participated in the simulation set out the lessons learnt and actions they are taking to address issues highlighted by the exercise.

The group expressed support for a set of recommendations developed by a working group of FSB and RCG members, and adopted by the FSB Plenary last week, to enhance the effectiveness of RCGs as an outreach and feedback mechanism.

Notes to editors

The RCG Europe is co-chaired by Katharine Braddick, Director General, Financial Services at the UK Treasury and Henry Ohlsson, Deputy Governor, Sveriges Riksbank. The membership of the FSB Regional Consultative Group for Europe includes financial authorities from Austria, Belgium, Czech Republic, Denmark, Finland, France, Germany, Greece, Hungary, Iceland, Ireland, Israel, Italy, Luxembourg, Netherlands, Norway, Poland, Portugal, Romania, Spain, Sweden, Switzerland, Ukraine, United Kingdom and the Group of International Finance Centre Supervisors. The European Commission, the European Central Bank and the ECB Banking Supervision also attended the meeting.

The FSB has six Regional Consultative Groups, established under the FSB Charter, to bring together financial authorities from FSB member and non-member countries to exchange views on vulnerabilities affecting financial systems and on initiatives to promote financial stability.1 Typically, each Regional Consultative Group meets twice each year.

The FSB coordinates at the international level the work of national financial authorities and international standard-setting bodies and develops and promotes the implementation of effective regulatory, supervisory, and other financial sector policies in the interest of financial stability. It brings together national authorities responsible for financial stability in 24 countries and jurisdictions, international financial institutions, sector-specific international groupings of regulators and supervisors, and committees of central bank experts.

The FSB is chaired by Randal K. Quarles, Governor and Vice Chairman for Supervision, US Federal Reserve; its Vice Chair is Klaas Knot, President, De Nederlandsche Bank. The FSB Secretariat is located in Basel, Switzerland, and hosted by the Bank for International Settlements.

  1. The FSB Regional Consultative Groups cover the following regions: Americas, Asia, Commonwealth of Independent States, Europe, Middle East and North Africa, and sub-Saharan Africa. [←]