IIF Authors

Status: Will be live at 01/25/2019 16:37

IIF response to IAIS public consultation on the Holistic Framework

On January 25, 2019 the IIF submitted its response to the IAIS public consultation on the Holistic Framework for Systemic Risk in the Insurance Sector. Key issues in the response letter include:

  • We believe that the on-going transition towards greater reliance on an activities-based approach represents a move towards a more effective method of preventing insurance sector risk exposures and vulnerabilities from propagating systemic risk to the global financial system or real economy.
  • The linkage between insurer risks and exposures and the potential material impact on the global financial system and real economy should be better articulated.
  • The proposed supervisory policy measures, the supervisory powers of intervention and data collections should be better aligned with the potential sources and transmission channels of systemic risk as well as with the overall supervisory objectives of the Holistic Framework.
  • We agree with the IAIS’ assessment that microprudential tools can play an important role in achieving macroprudential objectives in addition to their primary goal of protecting policyholders.
  • In designing and implementing policy measures, the IAIS should consider how the application of certain microprudential tools could serve to reduce macroprudential risk. The IAIS should consider additional macroprudential tools only to the extent that there is a gap in microprudential measures that cannot be filled with additional or expanded microprudential tools. In designing any necessary macroprudential measures, the interplay of microprudential and macroprudential tools should be assessed and care should be taken to avoid the unintended consequences of macroprudential measures on insurers and/or their policyholders.
  • We encourage the IAIS not to use the insurance capital standard (ICS) as a monitoring and assessment element during the Monitoring Period, as it is still in development, has not been tested adequately, and, thus, is not yet fit for purpose.