Global regulators have given themselves more time to bridge transatlantic differences that have delayed the world’s first capital rule for insurers, raising a cheer in the sector.
The International Association of Insurance Supervisors (IAIS) said its members have agreed in Kuala Lumpur on a “unified path to convergence” to further the “ultimate goal” of a single International Capital Standard (ICS).
The aim is to make it easier for investors to compare insurers from different countries by shedding light on their inner workings.
In a compromise seen as helping to keep Europe and the United States on board, the IAIS said there will be a two-phased introduction after the revised version of the draft standard comes out in late 2019.
A five-year monitoring phase will followed by an implementation phase.
The Swiss-based body released the first version of the ICS in July this year for field testing, and the second version is expected to include changes. The IAIS also speaks of third “ultimate goal” stage, without elaborating further.
The ICS won’t be binding on international insurers like Prudential, Generali, Allianz and AIG during the monitoring phase.
The IAIS said it was responding to stakeholder calls for greater clarity on what happens after 2019.
“We have reflected the priorities of our members and made significant progress towards our ultimate goal,” IAIS executive committee chair Victoria Saporta said in a statement.
The monitoring period will result in a “more appropriate and workable approach”, said Hugh Savill, director of regulation at the Association of British Insurers.
Reuters reported in September that the ICS was bogged down over which method to use for calculating capital requirements, with insurers hoping for some breakthrough at an IAIS meeting in Kuala Lumpur this week.
The first version of the ICS includes several methods for calculating capital to reflect the U.S. and European Union systems. In the meantime, the United States has begun work on a new capital rule of its own.
The IAIS will collect data to assess by the end of the monitoring period if the new U.S. rule comes up with the same capital “outcome” as the second version of the ICS, applying “national discretions” if need be to smooth out differences.
If similar, the U.S. rule could then be used as an alternative to the ICS.
Ted Nickel, Insurance Commissioner for the U.S. state of Wisconsin, said Thursday’s announcement from the IAIS was achieved through a “lot of give and take” and he looked forward to be part of the important work ahead.
(Reporting by Huw Jones; editing by Keith Weir)
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