The Association of British Insurers (ABI) has reacted to the release of version 1.0 of the global Insurance Capital Standard (ICS) by the International Association of Insurance Supervisors (IAIS) – and let’s just say, things aren’t looking good.
First off, the ABI called the IAIS’ timeline “ambitious”, outlining that issues need resolving. The trade body is not confident they will be addressed in time.
Last week the IAIS released ICS version 1.0 for extended field testing, which the global standard setting body said represents an important step towards the development of ICS version 2.0 by late-2019.
The ICS is a component of ComFrame, or the Common Framework for the Supervision of Internationally Active Insurance Groups (IAIGs). The IAIS said ComFrame consists of both quantitative and qualitative supervisory requirements tailored to IAIGs’ complexity and international scope.
As far as the British market is concerned though, the ABI doesn’t find the ICS applicable.
“The IAIS has published version 1.0 of the Insurance Capital Standard, their proposed standard for internationally active insurance groups. However, we remain concerned the ICS is not fit for use in the British market,” said Hugh Savill, ABI director of regulation.
Savill cited three reasons:
- It makes no allowance for internal models, despite firms spending substantial time and money developing them for Solvency II.
- It does not allow for appropriate treatment of long-term business with guarantees, like annuities in the UK.
- It gives insufficient recognition of diversification – despite this being at the heart of how insurance works.
“The ABI looks forward to continuing to work with the IAIS to address these issues – but I am doubtful they can be resolved within their ambitious timelines for the development and implementation. I would urge the IAIS to consider a more pragmatic timeline,” said Savill.
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