The International Association of Insurance Supervisors (IAIS) executive committee has approved an insurance capital standard (ICS) for internationally active insurers, marking progress toward a unified regulatory framework.
A report from AM Best stated that the committee also recognized the U.S.-developed aggregation method as a viable approach to implementing the standard.
The decision moves forward with a vote scheduled at the organization’s annual general meeting on Dec. 5 in Cape Town, South Africa.
Two adjustments were made to the final version of the standard, relating to the mapping of credit risk ratings and the determination of noninsurance risk, according to IAIS. The supervisory group described the capital standard as a tool that offers a consistent basis for regulatory discussions regarding the solvency of internationally active insurers.
Erin Collins, senior vice president of state and policy affairs for the National Association of Mutual Insurance Companies, said that the recognition of the aggregation method would help avoid unnecessary regulatory costs for policyholders. The principle-based, outcomes-focused standard is designed to accommodate variations across regulatory systems.
“The determination validates that one-size-fits-all standards are unnecessary to effectively protect solvency,” Collins said in a statement. “It upholds that diverse, successful approaches to regulation consider local capital requirements and differences in other regulatory requirements and supervisory tools.”
The aggregation method has been undergoing a comparability study, which entered its final phase in October 2023. This approach is seen as a way to offer jurisdictional flexibility while maintaining supervisory standards tailored to the scale and international operations of insurance groups.
The National Association of Insurance Commissioners (NAIC) emphasized that the adoption of the ICS and the comparability assessment of the aggregation method represent a collaborative effort by international regulators.
NAIC described the framework as essential for ensuring appropriate and effective supervisory standards aligned with the size and activities of internationally active insurance groups.
The IAIS identified updating the capital standard as a top priority for 2023, citing the need for a shared regulatory language to address the challenges of globally active carriers. The new standard aims to provide consistent guidance while respecting jurisdictional differences.
What are your thoughts on the approval of the new insurance capital standard and its implications for globally active insurers? Share your perspective in the comments below.
