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Insurance Capital Standard


Last Updated: 3/13/2023

Issue: At the end of 2019, the International Association of Insurance Supervisors (IAIS) adopted its Common Framework for the Supervision of Internationally Active Insurance Groups (ComFrame), which aims to: 

As part of ComFrame, the IAIS is developing a risk-based global insurance capital standard (ICS) for IAIGs. 

In October 2013, the IAIS announced the development of the ICS, which aims to provide a comparable measure of capital across jurisdictions that will help allow for a common understanding of IAIG capital adequacy. This will enhance cooperation and coordination among supervisors. The ICS is being developed as a group-wide, consolidated standard; it does not replace existing requirements for insurance legal entity supervision in any jurisdiction. 

Once adopted, the ICS will apply to IAIGs as part of ComFrame. In November 2017, the IAIS announced details on how ICS version 2.0 will be implemented. The first phase consists of a five-year monitoring period. During this time, a reference ICS will be used for confidential reporting to group-wide supervisors and discussion in supervisory colleges.  Additional reporting will also be collected at the option of the group-wide supervisor, including ICS based on a generally accepted accounting principles (GAAP) Plus valuation approach and/or an internal model-based capital requirement calculation. The second phase will be implementation of the ICS as a group-wide prescribed capital requirement (PCR). 

As part of this ongoing work, the IAIS has recognized the U.S. work on an aggregation approach. The IAIS will assess by the end of the monitoring period whether such an approach reaches comparable outcomes to the ICS. During the monitoring period, the IAIS will continue to collect data from interested jurisdictions relevant to the development of the Aggregation Method (AM). In November 2019, the IAIS established a timeline and work plan for assessing comparable outcomes, as well as work related to improvement of the ICS. 


The NAIC is actively involved in the development of international standards. In some cases, however, the standards may be ineffective or inconsistent with current U.S. policy or the U.S. state-based system of insurance regulation. International standards are non-binding, but their potential implementation could affect the competitiveness of the U.S. insurance sector. The risks inherent in insurance products, even for the same business line, can be very different from jurisdiction to jurisdiction. A single risk charge for that business line may well lead to incorrect assessments of the relative capital strength of IAIGs. That is why it is important that any international standard implemented appropriately reflect the risk characteristics of the underlying business and not undermine legal entity capital requirements in the U.S. Thus, the AM was developed to provide comparable outcomes to the ICS. 

Within the IAIS, work is underway to develop the criteria to assess whether the AM provides comparable outcomes to the ICS. This work is to be done in a manner that neither precludes the AM at the outset as an outcome equivalent approach to the ICS for measuring group capital nor gives it a free pass. Also worth noting is that finalization of the NAIC’s group capital calculation (GCC) should help contribute to understanding how aggregation approaches work and the broader discussion on comparability. The AM is influenced by the GCC and calculated in a similar manner. However, it will be more jurisdictional-agnostic, and therefore perhaps simpler, than the GCC. 

In 2019, NAIC has proposed an Interpretive Guidance on ICS Comparability Assessment Frameworkproviding an explanation of IAIS’s definition of comparable outcomes and an overarching approach to guide the development of high-level principles and criteria for assessing comparability.

The NAIC and U.S. state insurance regulators are actively engaged in the monitoring period and appreciate the participation of U.S. insurance groups that participate in the annual data collection. In addition to comparability, efforts continue to seek improvements to the ICS as part of the overall monitoring period process as there is interest in ensuring the ICS itself appropriately measures group capital adequacy and reflects risks. 

The International Insurance Relations (G) Committee met at the 2021 Fall National Meeting to discuss progress on International Association of Insurance Supervisors (IAIS) initiatives and heard an update on work in progress at international organizations, including the Organisation for Economic Co-operation and Development (OECD) and the Sustainable Insurance Forum (SIF), etc.

At the 2022 Fall National Meeting, Commissioner Anderson noted that approval of the comparability criteria has been pushed to March 2023 to give additional time to consider scenarios and sensitivity analysis that will be workable for the assessment process of ICS.


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