Last Updated 10/9/19
Issue: The supervision of internationally active insurance groups, or IAIGs, has garnered considerable discussion following the 2008 global financial crisis. Insurance markets have evolved over the years to become increasingly global and interconnected. In response to the increasing globalization in the insurance sector as well as key lessons learned from the financial crisis, the International Association of Insurance Supervisors (IAIS) began developing a major project called ComFrame (Common Framework for the Supervision of Internationally Active Insurance Groups). ComFrame is a set of international standards focusing on the effective group-wide supervision of IAIGs.
Overview: ComFrame was initiated in recognition of the growing relevance of IAIGs in the global insurance marketplace and the need for an internationally coherent framework for the supervision of large, complex, global insurance groups. The IAIS began developing ComFrame in July 2010 to build on individual member efforts to improve group supervision and provide better insights to supervisors on how IAIGs operate. As part of ComFrame, the IAIS is also developing a risk-based global insurance capital standard (ICS). Both of these have been developed over a multi-year period of field testing and refinement with supervisors and volunteer insurers. A public consultation on ComFrame and ICS Version 2.0 was launched by the IAIS in July 2018. According to the current IAIS plan, ComFrame, including the ICS Version 2.0, should be finalized and adopted towards the end of 2019 and ready for implementation by IAIS members in 2020.
ComFrame is built on the premise that IAIGs should be supervised in a collaborative fashion by home and host supervisors, thereby resulting in more effective and efficient supervision. It contains qualitative and quantitative requirements for IAIGs and for home and host supervisors that will foster greater cooperation and coordination among supervisors. ComFrame expands upon the high level standards and guidance set out in the IAIS Insurance Core Principles (ICPs), which generally apply on both a legal entity and group-wide level. To provide better context for ComFrame with respect to the ICPs, ComFrame will be presented under the relevant ICPs.
What is an IAIG?
The IAIS has two criteria for an insurance group to be identified as an IAIG: 1) International Activity — premiums are written in three or more jurisdictions, and percentage of gross premiums written outside the home jurisdiction are at least 10% of the group's total gross written premium; and 2) Size —based on a three-year rolling average, total assets of at least $50 billion USD, or gross written premiums of at least $10 billion USD.
Process of Identifying an IAIG
In general, the group-wide supervisor, in cooperation with other involved supervisors through a supervisory college, determines whether an insurance group or an insurance legal entity operating through branches is an IAIG after considering whether it meets the criteria outlined above. Supervisory colleges are intended to coordinate oversight of IAIGs at the group level.
The IAIS is not responsible for identifying IAIGs but will set out the criteria and process relevant supervisors will use for identifying IAIGs. As noted above, the criteria the IAIS has proposed for IAIGs are based on size and international activity, but allow a degree of supervisory discretion on whether a particular group should, or should not, be considered an IAIG. The IAIS expects that approximately 50 IAIGs will be identified by supervisors.
Insurance Capital Standard
For the past several years, the IAIS has been developing a global, risk-based insurance capital standard (ICS) which will become part of ComFrame. Both of these have been developed over a multi-year period of field testing and refinement with supervisors and volunteer insurers. A public consultation on ComFrame and ICS Version 2.0 was launched by the IAIS in July 2018. According to the current IAIS workplan, ComFrame, including ICS Version 2.0, should be finalized and adopted towards the end of 2019 and ready for implementation by IAIS members in 2020.
The ICS is being developed as a group-wide, consolidated insurance capital standard. It is not intended to replace existing arrangements or capital standards for legal entity supervision in any jurisdiction. The ICS aims to provide a comparable measure of capital across jurisdictions. Achieving comparability would help allow for a common understanding of IAIG capital adequacy, enhancing cooperation and coordination among supervisors. It would also augment the confidence in the group-wide supervisor's decisions and analysis on which all other supervisor depend.
Status:Over the past decade, the NAIC's international involvement has been increasingly focused on strengthening the supervision of insurers that operate internationally. A key focus of the NAIC Solvency Modernization Initiative (SMI) project was enhancing group supervision and ongoing enhancements are being made to toolbox U.S. state insurance regulators use for group-wide supervision.
U.S. insurance regulators support the objectives of ComFrame to the extent that it results in an outcomes-focused framework that enhances supervision of IAIGs. In 2014, the NAIC decided to form the ComFrame Development and Analysis (G) Working Group to provide technical and strategic input on the development of ComFrame and the ICS, as well as ongoing review and guidance.
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