Andrés Portilla Director, Regulatory Affairs Department March 12, 2014 International Insurance Regulatory Issues 10th Annual Insurance Public Policy Summit.

Andrés Portilla

Director, Regulatory Affairs Department

March 12, 2014

International Insurance Regulatory Issues

10th Annual Insurance Public Policy Summit“Confronting New Challenges in U.S. and International Regulation”

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List of Current IIF Insurance Members

.

• Swiss Re • Zurich Insurance Group• Allianz SE• Prudential Financial• AIG• MetLife• Generali • AXA Group• Ping An Insurance• Principal Financial Group

• Prudential plc• Manulife Financial• Reaseguradora Patria• Aflac• China Taiping Insurance Group

Co.• Aegon N.V.• China Life Insurance (Group) • Aviva plc• MassMutual Life Insurance

Company

Currently the IIF has 19 insurance members headquartered in 10 countries, including all 9 G-SIIs designated in July 2013:

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G20 Countries: Argentina, Australia, Brazil, Canada, China, France, Germany, India, Indonesia, Italy, Japan, the Republic of Korea, Mexico, Russia, Saudi Arabia, South Africa, Turkey, the United Kingdom, EEUU and the European Union

The Global Framework

G20

FSB(Financial Stability Board)

IOSCO IAISBCBS(Basel Committee on Banking Supervision)

(International Organization of Securities Commissions)

(International Association of Insurance Supervisors)

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• One key objective: to develop a harmonized, globally consistent regulatory framework for internationally active insurance groups

• Two key players: Financial Stability Board (FSB) and the IAIS

• Three main projects:

• Basic Capital Requirement (BCR)• ComFrame (Common Framework for the Supervision of

IAIGs)• Global Insurance Capital Standard (ICS)

International Regulatory Agenda

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  BCR HLA ICS ComFrame ICPs

Apply to G-SII

Apply to IAIG TBD Apply to All Other

Insurers

G-SIIs

IAIGs

All Insurers

ICPs

Step 1: BCR (to be

developed by end of 2014)

Step 2: HLA(to be developed

by end of 2015)

ComFrame expands on ICPs ComFrame

Step 3: ICS (to be

developed by end of 2016)

Recovery and ResolutionEnhance

Group-wide Supervision

G-SII Policy Measures

Capital Adequacy Component of ComFrame

Global Insurance Regulatory Framework Overview

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Global Systemically Important Insurers(G-SIIs)Policy Measures Overview

Introduction

On July 18, 2013, IAIS announced that it had developed a framework of policy measures for; however, the proposed HLA measures will be subject to further consultation before they are finalized in 2015 in advance of the proposed implementation date of 2019.

• Enhanced Supervision• Recovery and Resolution • Higher Loss Absorbency

• Enhanced Supervision• Recovery and Resolution • Higher Loss Absorbency

Components Components

Time ActionJuly 2013 Designation of the first G-SII cohort

July 2014 Crisis Management Groups (CMG) to be established for the first G-SII cohort

July 2014  

Systemic Risk Management Plan (SRMP) to be completed

End 2015  

IAIS to develop implementation details for HLA that will apply to designated G-SIIs starting from 2019

November 2017  

The FSB to designate the cohort of G-SIIs, based on the IAIS methodology and 2016 data, for which the HLA policy measure will apply, with implementation beginning in 2019

January 2019  

G-SIIs designated in November 2017 to apply the HLA requirements

Implementation Timeline

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Basic Capital Requirements(BCR) and Higher Loss Absorbency(HLA)

Jul Aug Sep Oct Nov

DecJan Feb Mar Apr May Jun

First BCR Consultation Ends

BCR Field Testing Starts

BCR Field Test Ends

Expert Inputs Concludes .

Second BCR Consultation Starts

IAIS approvesBCR Proposal

G20 Endorses BCR Proposal

Analysis on Field Test Results Concludes.

Second BCR Consultation Ends

FSB Reviews BCR Proposal

BCR 2014 Development Timeline

BCR

As a foundation for HLA requirements for G-SIIs, the IAIS will develop straightforward, basic capital requirements to apply to all group activities, including non-insurance subsidiaries. The BCR is intended to balance between simplicity and risk sensitivity, as well as provide a more comparable foundation for the HLA than local capital requirements.

Based on the foundation of the BCR, the higher loss absorbency requirements will focus on systemic risks and non-traditional non-insurance (NTNI) activities as the second step towards the ICS. The HLA will be completed in 2015 and implemented to G-SIIs from 2019.

HLA

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Common Framework for the Supervision of Internationally Active Insurance Groups (ComFrame)

Development

2010 to Dec 2013Field Testing

2014 to end of 2018Implementation

starts in 2019

ComFrame Development Timeline

Introduction

ComFrame is a set of international supervisory requirements focusing on the effective group-wide supervision of IAIGs. ComFrame is built and expands upon the high level requirements and guidance currently set out in the IAIS ICPs, which generally apply on both a legal entity and group-wide level.

ComFrame consists of the following three modules:

• Module one: The Scope of ComFrame

• Module two: The IAIG (including capital adequacy requirements)

• Module three: The Supervisor (including establishment of supervisory colleges)

Three Modules of ComFrame

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Global Insurance Capital Standards(ICS)

Introduction

On October 9, 2013, the IAIS announced that it is committed to develop a risk based ICS by the end of 2016, followed by a two-year period of testing and refinement with supervisors and IAIGs. The ICS is scheduled to be implemented beginning in 2019. After completion, the ICS will be included in ComFrame replacing the content of Module 2 Element 5 Capital Adequacy Assessment.

The IAIS has committed to develop the ICS in the following three steps:

• The first step is to develop ICS by end 2016.

• The second step is to test and refine the framework by 2018.

• The third step is to implement it globally starting in 2019.

Development Steps of the ICS

Development Phase

In three steps by the end of 2016Testing and Refining

To the third quarter of 2018

ICS Development Timeline

Andrés Portilla

Director, Regulatory Affairs [email protected]

International Insurance Regulatory Issues

10th Annual Insurance Public Policy Summit“Confronting New Challenges in U.S. and International Regulation”