The International Association of Insurance Supervisors (IAIS) has announced that agreement has been reached between members on the next steps towards the introduction of the Insurance Capital Standard (ICS). The ICS seeks to ensure comparable supervisory outcomes across different jurisdictions. The ICS has been developed in the context of the IAIS objective ‘to promote effective and globally consistent supervision of the insurance industry in order to develop and maintain fair, safe and stable insurance markets for the benefit and protection of policyholders and to contribute to global financial stability.’The ICS forms a significant part of ComFrame, the structure within which Internationally Active Insurance Groups (IAIGs) are supervised. The IAIS plans for ICS to be the “Prescribed Capital Requirement” (PCR) within ComFrame. The PCR works alongside a minimum capital requirement and operates in a manner similar to the Solvency II Solvency Capital Requirement.
The IAIS recognises that there are many practical implementation issues to address before the ICS is introduced as a group-wide PCR for IAIGs. Accordingly, IAIS has agreed that the next stages of ICS implementation will be conducted in two phases:
- A first phase, referred to as the “monitoring period”, in which the ICS version 2.0 will be used for confidential reporting to group-wide supervisors and for discussion in supervisory colleges. This will allow the IAIS to discuss and assess the ICS in comparison with existing group capital standards. The ICS will not be used as a basis to trigger supervisory action during this period. The monitoring period will last for five years.
- A second phase will be the “implementation of the ICS as a group-wide PCR”.
The IAIS embarked on the development of the ICS in order to establish a common framework for the supervision of solvency in globally active insurance groups. The agreement on next steps toward the ICS marks a significant development in the journey towards effective supervisory convergence on a global level.