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IAIS Updates on G-SIFI Timetable, Could Be More Aligned with U.S. SIFIs

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Peter Braumüller, chair of the executive committee of the International Association of Insurance Supervisors (IAIS), discussed IAIS work on systemic risk at the PROGRES International Seminar hosted by the Geneva Association in Geneva Thursday, giving a timetable for the identification of global systemically important insurers (G-SIIs, or G-SIFIs stateside).

The IAIS said it currently expects the next phases of the G-SII project to include a two-month public consultation on the proposed assessment methodology scheduled from June at the earliest, followed by a second data call and a two-month public consultation on the potential G-SII policy measures, Braumüller stated. 

At the request of the G20 Leaders and the Financial Stability Board (FSB), the IAIS has been developing the G-SII assessment methodology and policy measures. 

“The global insurer data collection required for this project – the first ever on such a scale – has presented unique challenges, and we are grateful for the continued support of our members and the participating insurers,” he stated.

The IAIS work is different than the U.S. efforts under The Financial Stability Oversight Council (FSOC) in determining that U.S. non-bank such as an insurer is SIFI (a “systemically important financial institution”) and will therefore be subject to federal as well as state regulation. Ostensibly, an insurer can be subject to both new global and domestic capital standards, or one and not the other. Or, of course, none. 

It is unclear how if an insurer is subject to both, and the capital standards conflict, how that would be worked out.

However, comments by Federal Insurance Office Director (FIO) Michael McRaith at a forum in January suggested some alignment. “We–FIO–are working to develop an international process for designating globally systemically important insurers that aligns with the criteria and timing laid out by the [FSOC],” McRaith stated.

“FIO has been engaged in this discussion since July, and we have developed a solid working relationship with our international counterparts in this effort,” he stated at the Property/Casualty Insurance Joint Industry Forum in New York Jan. 10.  In fact, he pointed to the fact that the IAIS has pushed back the date by which it will identify G-SIFIS to the FSB as evidence of this alignment process.

FSOC also has the statutory authority to not only recommend stricter standards for the largest, most interconnected firms, including nonbanks, designated by the FSOC for Federal Reserve supervision, but has a significant role in determining whether action should be taken to break up those firms that pose a “grave threat” to the financial stability of the United States, according to the Dodd Frank regulatory reform statute. See: 

The FSOC consists of 10 voting members and 5 nonvoting members. 

In the international arena Braumüller employed the recent U.S. regulatory catch-word of standard-setting in his remarks.

“Each of the standard setting bodies plays a vital role in setting, implementing, and assessing international standards,” said Braumüller in his comments from Geneva “However, as the insurance marketplace grows even more globally interconnected, we must respond to the increasing need for supervisors to coordinate their actions and to allocate resources in a manner that best suits the ultimate goal of policyholder protection.”

The NAIC is saying it is a forum for standard-setting, perhaps to comply with international language on insurance  supervisory roles of sovereign nations, while Rep. Ed Royce, R-Calif., has engaged it in a conversation to define itself more clearly. Meanwhile, the IAIS calls itself “ a global standard setting body whose objectives are to promote effective and globally consistent regulation and supervision of the insurance industry…” See more at: 

At the Geneva meeting, Braumüller also discussed the IAIS’ central role in standard setting and implementation, stressing the IAIS’ commitment to promote effective and globally consistent supervision of the insurance industry. Mr. Braumüller described the IAIS’ robust self-assessment and peer review program, and the IAIS’ renewed focus on emerging markets as demonstrated through the recent formation of the Financial Inclusion Subcommittee.