The G-20’s Financial Stability Board (FSB) says it will identify in July global insurers it deems so important and interconnected to the worldwide insurance economy that tighter and more comprehensive worldwide supervision is warranted.
Despite the fact that many in the global insurance world have argued there should be no Global Systemically Important Insurers (G-SIIs), as they are called, the International Association of Insurance Supervisors (IAIS) submitted a list to the FSB, which issued a release from Basel, Switzerland today following its meeting yesterday.
The IAIS would not disclose the names of the insurers or say whether any U.S. companies were among them.
Companies such as Prudential Insurance, AIG, Berkshire Hathaway and MetLife as well as various U.S. property insurers that do business globally were candidates for review, as were many global insurers and reinsurers. All told, the IAIS had requested nonpublic data from about 50 global firms, 14 of which are U.S. based.
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The insurers identified as G-SIIs in July will be subject to policy measures that include enhanced group-wide supervision and higher capital requirements. They will also need to be able to show they can plan for their own orderly demise, should they fail.
A decision on the G-SII status of measures for major reinsurers will be made the following July, in 2014.
Unlike the U.S. process to determine systemically important financial institutions (SIFIs), the FSB says in an email that its designations will be final and firms will not be allowed to contest the designation.
The FSB says its list of G-SIIs will be reviewed each year, based on updated data, and firms may be removed if their assessed systemic risk declines.
As for the capital requirements to be imposed, the IAIS will develop “straightforward, backstop capital requirements to apply to all group activities, including non-insurance subsidiaries, to be finalized by the time of the G20 Summit in 2014,” the FSB states in its release.
For the industry, questions remain. It is unclear if the U.S. Financial Stability Oversight Council (FSOC), which has proposed so far just two insurers as domestic SIFIs—Prudential and AIG—would implement the IAIS measures and methodologies.