A common structure for the assessment of insurer solvency
The International Association of Insurance Supervisors (IAIS) has taken an important step in formulating a more consistent, reliable and transparent approach to the assessment of insurer solvency worldwide with the release today of The IAIS common structure for the assessment of insurer solvency.
Building on the earlier Framework1 and Cornerstones2 papers, the new document, which is, in the words of Tom Karp, Chair of the Technical Committee, “fundamental in developing a common structure for the assessment of insurer solvency and an important stepping stone for the IAIS in developing its standards and guidance on this topic.”
The paper presents a coherent risk-based methodology for the setting of regulatory financial requirements. It describes the respective roles of technical provisions and required capital and discusses the concepts that underpin the determination of these components in the context of a risk-based solvency regime.
While the focus of the paper is on financial requirements, it also addresses the more qualitative components of a solvency regime – namely governance and market conduct. Rob Curtis, Chairman of the Solvency and Actuarial Issues Subcommittee commented: “The paper recognises that risk-sensitive financial requirements can only fulfil their intended role when supplemented by sound governance and market conduct practices and supported by appropriate public disclosure requirements.”
This approach is consistent with the IAIS position reflected in the Framework paper, which emphasises the interdependence of these quantitative and qualitative aspects in the process of insurance supervision. It is also consistent with other IAIS initiatives, including the establishment of a new Corporate Governance task force to give added focus to this important element of the Framework for Insurance Supervision.
Later this year the IAIS plans to release a revised Roadmap paper3 which will present the total landscape for standard-setting activities over the next two years. It will further signal the importance of interaction and coordination of these various projects in developing a cohesive set of papers within the context of the Framework for Insurance Supervision.
( This is the Press release of IAIS)
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