The development of the Insurance Capital Standard (ICS) by the International Association of Insurance Supervisors (IAIS) has been, since its inception in 2013, recognized by EIOPA as a key step for the enhancement of global financial stability as well as policyholder protection. The IAIS has already achieved substantial progress in the development of the ICS, with the agreement of ICS 2.0 and the launch of the Monitoring Period in 2019, representing an important milestone of that progress.
During this phase, EIOPA has remained strongly committed to the ICS, a project that is of great importance for the global insurance supervisory community. EIOPA is pleased to see that ICS 2.0 incorporates a well-designed market-adjusted valuation, capital requirements that are adequate and risk-sensitive and capital resources that are of appropriate quality. EIOPA also welcomes that work continues in important areas such as internal models, on which a workshop was organised recently by the IAIS. EIOPA is supportive of the inclusion of internal models in the ICS, focusing on their use as an enhanced risk management instrument.
In parallel to the development of the ICS by the IAIS, the United States and other interested jurisdictions are developing an Aggregation Method (AM) approach to a group capital calculation. The future implementation of the ICS throughout the world will bring convergence to the supervision of Internationally Active Insurance Groups (IAIGs). However, it could be possible for a different approach to deliver substantially the same outcomes. In this regard, EIOPA welcomes the publication of the consultation paper on detailed comparability assessment criteria, based on the previous work on High Level Principles and definition of comparability. This consultation paper sets the basis to establish an assessment which will, based on quantitative evidence from a sufficiently large sample of life and non-life IAIGs, evaluate whether the AM and the ICS produce similar results over time and under different economic and market conditions. An essential requirement is that the AM, as a framework for implementation of the ICS in the United States (or other interested jurisdictions), delivers outcomes which are at least as prudent as the ICS. Against this background, EIOPA encourages all stakeholders to participate in the consultation exercise to help, with their feedback, further shape the comparability criteria as well as the scenarios to be used as part of the assessment.
The journey towards the finalisation of the ICS is still ongoing, as the monitoring period approaches its defining stage. EIOPA remains fully committed to the success of developing a global capital standard for the insurance sector – the ICS – and encourages all IAIGs to take part in the monitoring exercise. The collection of data in the upcoming year will be key for defining the final outcome. To that end, a strong and leading European participation in the project is key, in particular for groups relying on internal models to determine their prudential capital requirements.