The International Association of Insurance Supervisors will release its global insurance capital standards by 2016 and give insurers and supervisors two years for “testing and refinement,” the Basel-based organization of supervisors and regulators said in an e-mailed statement today.
The IAIS helped the Switzerland-based Financial Stability Board draw up a list of systemically important firms that was published in July. The FSB, led by Bank of England Governor Mark Carney, is coordinating global regulators’ response to prevent a repeat of the turmoil that followed the collapse of Lehman Brothers Holdings Inc. and bailout of American International Group Inc. (AIG)
“It is undeniable that the business of insurance is global, and global issues demand global responses,” IAIS chairman Peter Braumueller said in the statement. This is why the association will develop and implement the “first-ever risk-based global insurance capital standard.”
Late next year, the IAIS will implement capital rules for the insurers that are deemed systemically important, currently including MetLife Inc. (MET), Prudential Financial Inc. (PRU), Axa, AIG and Allianz. These so called backstop capital rules will be the foundation for the higher-loss absorbency requirements for these companies, and will “inform the development” of the global insurance capital standards, the IAIS said.
“It is clear that there will be significant challenges to the creation of a global capital standard for insurers, particularly within the time frame proposed,” John Fitzpatrick, secretary general of insurance lobby group the Geneva Association said in an e-mailed statement. “Development and implementation of global capital standards within other financial service sectors have taken many years to develop.”
The IAIS meets in Taipei next week for its annual conference and general meeting.
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