Financial Stability Board endorses IAIS holistic framework and drops G-SII identification

The Financial Stability Board (FSB) is to discontinue the annual identification of global systemically important insurers (G-SIIs) in favour of using the International Association of Insurance Supervisors (IAIS) holistic framework for the assessment and mitigation of systemic risk in the insurance sector, to inform its consideration of systemic risk in insurance. The move, made in consultation with the IAIS, follows a review after three years of implementation of G-SII identification. “Implementation of the holistic framework has been strong across each of its key elements: risk assessment through the annual global monitoring exercise (GME), enhanced macroprudential supervisory policy measures and robust implementation assessment – with demonstrated benefits for the effectiveness of macroprudential supervision in the insurance sector,” said Vicky Saporta, IAIS executive committee chair. “Reflecting on the three years since its adoption, FSB and IAIS members agree that the holistic framework provides a more effective basis for assessing and mitigating systemic risk in the insurance sector than G-SII identification.” The IAIS adopted the holistic framework in November 2019 as part of a set of reforms “contributing to the maintenance of global financial stability”. It said demonstrated benefits of the holistic framework relative to the annual G-SII identification include: - The systemic risk assessment through the GME has proven more comprehensive, forward-looking and versatile in times of crises - The holistic framework supports a more robust collective discussion among supervisors on the potential buildup of systemic risk and appropriate supervisory responses - Enhanced supervisory measures for macroprudential purposes are applied to a much broader set of insurers than those formerly identified as G-SIIs - Robust implementation assessment of the holistic framework supervisory measures helps ensure they are implemented in a comprehensive and consistent manner across jurisdictions. The FSB, as the international body that monitors and makes recommendations about the global financial system, will continue to receive from the IAIS an annual update on the outcomes of its GME, including potential concentration of systemic risks at an individual insurer and sector-wide level, and the supervisory response to identified risks. “Going forward, the FSB will utilise assessments available through the holistic framework to inform its considerations of systemic risk in the insurance sector. To this end, the IAIS will continue its annual data collection from individual insurers, complemented by data collection from supervisors to support its assessment of sector-wide trends with regard to specific activities and exposures, and its annual reporting to the public on the outcomes of its assessment and progress in implementation of the holistic framework supervisory policy measures,” said the IAIS. “Through the experience of the past three years, we see the holistic framework has proven robust and is a better approach to assessing and mitigating systemic risk in insurance,” said Jonathan Dixon, IAIS secretary general. “Going forward, it will be important to continue refining the global risk assessment and ensuring robust implementation of supervisory measures, with strong engagement of insurers and supervisors.” The IAIS said it has launched a public consultation seeking input on the GME individual insurer-monitoring assessment methodology, “to further refine its risk assessment”.

Financial Stability Board endorses IAIS holistic framework and drops G-SII identification

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