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IAIS Standards Setting ActivitiesIAIS Standards Setting Activities
London – 3 February 2004Yoshi Kawai – Secretary General
International Association of Insurance Supervisors (IAIS)Website: www.iaisweb.org
IAIS Standards Setting ActivitiesIAIS Standards Setting Activities2February 2004
Yoshi Kawai
OverviewOverview
1. IAIS structure and process
2. Insurance Core Principles
3. IAIS views on IASB standards
4. Solvency standards
5. Reinsurance standards
6. Implementation of IAIS standards
IAIS Standards Setting ActivitiesIAIS Standards Setting Activities3February 2004
Yoshi Kawai
1.11.1 IAIS Structure IAIS Structure –– January 2004January 2004
Secretariat
Dialogue Group
SecretariatBudget Committee
Education Subcommittee
Emerging Markets Committee Working Group on Observership & Membership Issues
Insurance Laws, Regulations, Practices& Standards Subcommittee
Task Force on Assessment& Implementation of ICPs
Investments Subcommittee Financial Conglomerates Subcommittee
Subcommittee on Enhanced Disclosure Insurance Fraud Subcommittee
Solvency & Actuarial Issues Subcommittee Working Group on Electronic Commerce/Internet
Task Force on Enhancing Transparency& Disclosure in the Reinsurance SectorAccounting Subcommittee
Reinsurance and Other Forms of Risk Transfer Subcommittee
Technical Committee
Executive Committee
Association in General Meeting
Task Force on the Core Curriculum Project
Task Force on the Revision of the By-laws
IAIS Standards Setting ActivitiesIAIS Standards Setting Activities4February 2004
Yoshi Kawai
1.21.2 IAIS Standard SettingIAIS Standard Setting
Core Principles
PrinciplesSupervisory Standards
Guidance & Issues Papers
• Two pillar approach
IAIS Standards Setting ActivitiesIAIS Standards Setting Activities5February 2004
Yoshi Kawai
1.31.3 IAIS Document AdoptionIAIS Document Adoption
Paper Outline or Initial Draft
Approval or Redirection
Adoption (hopefully)
Working Party
Technical Committee and Executive Committee
General Meeting of Members
WP Members Some Observers
IAIS Members & Observers
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IAIS Members & Observers
IAIS Standards Setting ActivitiesIAIS Standards Setting Activities6February 2004
Yoshi Kawai
OverviewOverview
1. IAIS structure and process
2. Insurance Core Principles3. IAIS views on IASB standards
4. Solvency standards
5. Reinsurance standards
6. Implementation of IAIS standards
IAIS Standards Setting ActivitiesIAIS Standards Setting Activities7February 2004
Yoshi Kawai
• The first ICPs adopted in October 2000, based on 1997 Insurance supervisory principles
• FSAP (the Financial Sector Assessment Program) started in 1999
• Joint Forum comparison of the core principles in banking, insurance and securities sectors in 2001
• FSAP experiences• Final Revised ICPs adopted in Oct 03
2.12.1 History of Insurance Core PrinciplesHistory of Insurance Core Principles
IAIS Standards Setting ActivitiesIAIS Standards Setting Activities8February 2004
Yoshi Kawai
• Extend scope • Reinforce existing principles• Cover reinsurance supervision widely• “ Preconditions” are converted to a
“principle”• Integrate principles and methodology
2.22.2 Major ICP ChangesMajor ICP Changes
IAIS Standards Setting ActivitiesIAIS Standards Setting Activities9February 2004
Yoshi Kawai
ICP 2: Supervisory objectives
ICP 3: Supervisory authority
ICP 3: Supervisory authority
ICP 6: Licensing4. The supervised entity
ICP 5: Supervisory cooperation and information sharing
3. The supervisory system
Reason for supervision, Scope of ICPs, Implementation & Assessment1. Introduction
ICP 10: Internal control
ICP 1: Conditions for effective insurance supervision2. Conditions
ICP 7: Suitability of persons
ICP 8: Changes in control and portfolio transfers
ICP 9: Corporate Governance
Revised ICPsContents
2.32.3 ICP Structure & ContentICP Structure & Content
IAIS Standards Setting ActivitiesIAIS Standards Setting Activities10February 2004
Yoshi Kawai
ICP 22: Derivatives and similar commitments
ICP 15: Enforcement or sanctions
ICP 16: Winding-up or exit from the market
ICP 17: Group-wide supervision
ICP 11: Market analysisICP 12: Reporting to supervisors and off-site monitoringICP 13: On-site inspection
ICP 18: Risk assessment and management6. Prudential requirements
ICP 14: Preventive and corrective measures
5. Ongoing supervision
ICP 23: Capital adequacy and solvency
ICP 19: Insurance activity
ICP 20: Liabilities
ICP 21: Investments
Revised ICPsContents
2.32.3 ICP Structure & ContentICP Structure & Content
IAIS Standards Setting ActivitiesIAIS Standards Setting Activities11February 2004
Yoshi Kawai
ICP 28: Anti-money laundering, combating the financing of terrorism8. AML/CFTReferences to other IAIS principles, standards and papersAnnex 1
ICP 24: IntermediariesICP 25: Consumer protectionICP 26: Information, disclosure & transparency towards the market
Assessment methodologyAnnex 2
ICP 27: Fraud
7. Markets and consumers
Revised ICPsContents
2.32.3 ICP Structure & ContentICP Structure & Content
IAIS Standards Setting ActivitiesIAIS Standards Setting Activities12February 2004
Yoshi Kawai
OverviewOverview
1. IAIS structure and process
2. Insurance Core Principles
3. IAIS views on IASB standards4. Solvency standards
5. Reinsurance standards
6. Implementation of IAIS standards
IAIS Standards Setting ActivitiesIAIS Standards Setting Activities13February 2004
Yoshi Kawai
3.13.1 IASB projects on insurance and financial IASB projects on insurance and financial instrumentsinstruments
Insurance contracts project– Accounting for insurance contracts – Two step approach
• Phase I• Phase II
Financial instruments project (Revised IAS 39)
IAIS Standards Setting ActivitiesIAIS Standards Setting Activities14February 2004
Yoshi Kawai
3.23.2 IAIS views on IASB standardsIAIS views on IASB standards
• The IAIS supports harmonisedaccounting principles
• The consistent approach to assets and liabilities is essential
• The IAIS disagrees to possible mismatch in accounting models in phase I
IAIS Standards Setting ActivitiesIAIS Standards Setting Activities15February 2004
Yoshi Kawai
What if assets & liabilities are similarly valued..What if assets & liabilities are similarly valued..
(Source) ACLI-IAA Second Joint Research Project, 3 June 2003
IAIS Standards Setting ActivitiesIAIS Standards Setting Activities16February 2004
Yoshi Kawai
What if assets & liabilities are dissimilarly valued..What if assets & liabilities are dissimilarly valued..
(Source) ACLI-IAA Second Joint Research Project, 3 June 2003
IAIS Standards Setting ActivitiesIAIS Standards Setting Activities17February 2004
Yoshi Kawai
3.23.2 IAIS Views on IASB standards IAIS Views on IASB standards (cont.)(cont.)
• IAIS proposal to mitigate the problem of mismatch– Temporary modification to asset measurement
bases in the phase I – Introduction of the concept: assets with fixed
maturity matching insurance liabilities and held at amortised cost
IAIS Standards Setting ActivitiesIAIS Standards Setting Activities18February 2004
Yoshi Kawai
3.23.2 IAIS Views on IASB standards IAIS Views on IASB standards (cont.)(cont.)
• Use of own credit rating– Insurance supervisors are unanimously against the use
of own credit rating in measurement of liabilities
• Practicality– Practicality should be taken into account,
in particular, in emerging markets
• Due process
IAIS Standards Setting ActivitiesIAIS Standards Setting Activities19February 2004
Yoshi Kawai
OverviewOverview
1. IAIS structure and process
2. Insurance Core Principles
3. IAIS views on IASB standards
4. Solvency standards5. Reinsurance standards
6. Implementation of IAIS standards
IAIS Standards Setting ActivitiesIAIS Standards Setting Activities20February 2004
Yoshi Kawai
• Adopted in 2002• Capital Adequacy and Solvency (principle)
– Adopted in 2003:
• Quantifying and assessing insurance liabilities (2003) (discussion paper)
• The use of actuaries (guidance paper)
• Solvency control levels (guidance paper)
• Stress Testing by insurers (guidance paper)
4.4. Solvency standards Solvency standards
IAIS Standards Setting ActivitiesIAIS Standards Setting Activities21February 2004
Yoshi Kawai
• In next two years: • Suitable forms of capital (standard)
• Capital adequacy requirements (standard)
• Framework on solvency requirements
4.4. Solvency standards (cont.)Solvency standards (cont.)
IAIS Standards Setting ActivitiesIAIS Standards Setting Activities22February 2004
Yoshi Kawai
OverviewOverview
1. IAIS structure and process
2. Insurance Core Principles
3. IAIS views on IASB standards
4. Solvency standards
5. Reinsurance standards6. Implementation of IAIS standards
IAIS Standards Setting ActivitiesIAIS Standards Setting Activities23February 2004
Yoshi Kawai
5.5. Reinsurance standardsReinsurance standards
• Supervision of reinsurance– Evaluation of reinsurance cover– Supervision of reinsurance companies
• Disclosure and transparency of reinsurance
IAIS Standards Setting ActivitiesIAIS Standards Setting Activities24February 2004
Yoshi Kawai
• Supervisory Standard on the Evaluation of the Reinsurance Cover of Primary Insurers and the Securities of their Reinsurers in January 2002– Applies to the supervision of the reinsurance cover
of primary insurers– It discusses:
• The policies and procedures that primary insurers should have in place
• Supervisory approaches for evaluating the adequacy of the reinsurance cover
5.1 5.1 Evaluation of Reins CoverEvaluation of Reins Cover
IAIS Standards Setting ActivitiesIAIS Standards Setting Activities25February 2004
Yoshi Kawai
• Principles on Minimum Requirements for Supervision of Reinsurers in October 2002
– All reinsurers should be supervised
– Anticipate a global approach to supervision based on supervision by the home jurisdiction
5.25.2 Supervision of ReinsurersSupervision of Reinsurers
IAIS Standards Setting ActivitiesIAIS Standards Setting Activities26February 2004
Yoshi Kawai
• Standard on Supervision of Reinsurers in October 2003
– Focuses on Supervisory Review • Technical provisions• Investments & liquidity• Economic capital• Corporate governance• Exchange of information
• Current activities: Mutual recognition
5.3 5.3 Further Supervision of ReinsurersFurther Supervision of Reinsurers
IAIS Standards Setting ActivitiesIAIS Standards Setting Activities27February 2004
Yoshi Kawai
– Responds to concerns raised notably by the Financial Stability Forum
– Task Force on Enhancing Disclosure and Transparency in the Reinsurance Sector (Task Force Re) established in October 2002
– Developing an outline for global reinsurance market statistics
5.45.4 Transparency of ReinsuranceTransparency of Reinsurance
IAIS Standards Setting ActivitiesIAIS Standards Setting Activities28February 2004
Yoshi Kawai
OverviewOverview
1. IAIS structure and process2. Insurance Core Principles3. IAIS views on IASB standards4. Solvency standards5. Reinsurance standards
6. Implementation of IAIS standards
IAIS Standards Setting ActivitiesIAIS Standards Setting Activities29February 2004
Yoshi Kawai
6.6. Implementation of IAIS standardsImplementation of IAIS standards
• Aiding the Implementation of Standards– Organising Training & Seminars– Developing implementation tools– Facilitating Provision of Technical Assistance– Assisting FSAP
• Cooperation– Forum for Discussion amongst Supervisors– Represent the Insurance Sector in International Forums
• Joint Forum, Financial Stability Forum, IASB, IFAC etc
IAIS Standards Setting ActivitiesIAIS Standards Setting Activities30February 2004
Yoshi Kawai
www.iaisweb.org
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