PCI Applauds Global Regulators’ Expanded Timeline for G-SII Rules

March 15, 2012

The International Association of Insurance Supervisors (IAIS) announced that its timetable with the Financial Stability Board (FSB) to develop a means to identify “global systemically important insurers,” or “G-SII’s” for additional regulation has been delayed. It is now looking towards June, rather than this month, to publish a draft methodology for public comment.

The move was met with approval by the Property Casualty Insurers Association of America (PCI), who noted that the “initial, rushed schedule for this important project did not allow sufficient time for regulators to develop and receive public comments on appropriate metrics to identify and quantify systemically-risky non-insurance activities.”

Steve Broadie, PCI’s vice president of financial policy, stated: “We applaud the IAIS and the FSB for taking a more measured and deliberate approach. PCI and the rest of the global insurance industry have repeatedly urged the IAIS and FSB to take all of the time necessary to perform this important analysis properly.”

He also pointed out that the PCI is encouraged by the fact that the “IAIS has publicly recognized that traditional insurance business has not caused systemic risk. This announcement demonstrates that the supervisors involved understand the importance of allowing adequate time for a fully reasoned process rather than rushing towards an arbitrary deadline.”

IAIS Secretary General Yoshihiro Kawai announced the new timetable on March 13 in Basel, Switzerland. The previous schedule called for the IAIS to release the draft G-SII determination methodology to PCI and other IAIS observers in March for a 30-day comment period, with the FSB making a recommendation to the G20 Leaders Summit in June. It was anticipated that the final list of insurance G-SIIs, if any, would then be made public in November 2012. The new comment period, Mr. Kawai said, would be two months.

In November 2011, the FSB released the names of the initial group of 29 banks that qualified as global systemically important financial institutions (G-SIFIs). These G-SIFIs face potential capital surcharges of between 1 percent – 2.5 percent as well as significantly stricter oversight. The FSB, IAIS and securities regulators have been similarly working on methodologies to identify systemically important non-banks, including insurers and securities, along with the appropriate additional regulations for non-bank G-SIFIs.

Broadie added: “It is unclear as to what effect this delay will have on the overall G-SII project. But it is more important for the IAIS and the FSB to take the time to get it right, rather than to do it fast on arbitrary timelines. We appreciate their recognition at this point that this is the right approach to take.”

Source: Property Casualty Insurers Association of America

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