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European insurance and reinsurance federation Insurance Europe has offered its insights on the draft Common Framework for the Supervision of Internationally Active Insurance Groups (ComFrame) by the International Association of Insurance Supervisors (IAIS).
A set of international supervisory requirements focussed on the effective group-wide supervision of internationally active insurance groups (IAIGs), ComFrame expands on the high-level standards and guidance currently set out in the IAIS Insurance Core Principles (ICPs). The IAIS conducted a public consultation, and Insurance Europe’s comments have been submitted.
“On the overall consultation, Insurance Europe appreciates the IAIS’s efforts to clarify how requirements are to be applied across an IAIG – i.e., for example, whether they are applied at the group level or the legal entity level,” stated the federation. “Additional guidance on what approach should be taken if the group-wide and legal entity supervisors have different expectations would be appreciated.”
Part of the consultation examined the glossary terms, with a particular definition catching the trade body’s attention.
“While Insurance Europe does not necessarily disagree with the proposed definition of portfolio transfer, it should be made clear that the transfer of a single policy does not trigger the same supervisory processes as transfers of all or parts of an insurer’s portfolios of contracts,” read one of its comments.
“In some provisions under ICP 6 for example, it appears that IAIS considers the transfer of a single policy should suffice to trigger a full supervisory approval process. This would not be efficient or proportionate.”
Reacting to ComFrame in ICP 5, Insurance Europe pointed to imposing additional reporting requirements and increasing solvency monitoring activities as not being the most obvious or suitable supervisory measure to take in the case of governance or suitability shortcomings.
It also commented on ComFrame Guidance CF7.2.b.1, saying: “It is not clear how an IAIG’s strategy would necessarily provide information about the IAIG’s corporate governance framework.
“Insurance Europe would urge the IAIS to introduce a materiality threshold (‘material’ or ‘significant’), at least for bullet points 3, 5, and 6. Further, the IAIS should reconsider the necessity of including anticipated changes in market share (5th bullet point).”
As for the requirement to provide an explanation of strategy yearly, the federation suggested its removal in favour of a more proportionate basis, say periodically or only when there is a change in strategy.
“The frequency of the review should not be annually but should depend on the risk profile and be reactive to material changes of the structure/business strategy of the IAIG,” wrote Insurance Europe. “If the IAIS deems it necessary to establish a minimum frequency (in addition to the condition of material changes), it should be every five years instead of every year.”
Other comments relate to matters such as the compliance function, legal obligations, and internal audits.
Meanwhile the trade body has also asked for the deletion of particular portions, including a guidance involving jurisdictions.
“The responsibility of the IAIS is to establish the framework and describe/define ‘jurisdiction’ / ‘internationally active’ in an objective manner, for IAIS members to interpret and comply with,” explained Insurance Europe. “The IAIS should then have a role in ensuring that implementation is being done consistently across its members.
“Furthermore, international insurance standards need to be designed in a way to not create competitive disadvantages between markets. Therefore, it is not understandable, nor justified, that the IAIS explicitly takes such a detrimentally different approach towards the US and the European Union, without any justification provided.”
