IIF Authors

Status: Will be live at 05/07/2021 16:12

IIF Response to IAIS Draft Application Paper on Macroprudential Supervision

On March 8, the International Association of Insurance Supervisors (IAIS) issued a Draft Application Paper for public consultation on Macroprudential Supervision. The Draft Application Paper aims to help with practical application of the supervisory material related to macroprudential supervision in ICP 24, which was revised in 2019 as part of the holistic framework for the assessment and mitigation of systemic risk in the insurance sector to more explicitly address, among other topics, the build-up and transmission of systemic risk at the individual insurer- and sector-wide level. The Draft Paper provides guidance and examples on considerations on developing and applying a macroprudential supervision framework in a proportionate way, ways that supervisors may tailor requirements of data collection and the practical application of ICP 24. 

Following a series of discussions with the Insurance Working Group (IWG), the IIF submitted its response to the IAIS on May 7. In its response, the IIF urged the IAIS to rebalance the Draft AP to focus on sector-wide risk relative to individual insurer risk, consistent with the approach taken in the Holistic Framework and ICP 24. To this end, we encourage the IAIS to refocus the Draft AP on sector-wide macroprudential analysis, and reserve deeper focus on individual insurers for instances when sectoral analysis suggests that an insurer’s activities may be contributing to systemic stress. We also recommend the IAIS provide practical guidance for supervisors on strengthening sector-wide assessment frameworks, and for coordinating activities and sharing analyses between jurisdictions. Finally, we encourage the IAIS to reflect that any assessment of systemic risk should be made at the group level by the competent authority. A clear statement by the IAIS on the need for a group level assessment led by the group supervisor is critical to avoiding multiple and/or inconsistent approaches to the assessment of and response to potential systemic risks in an insurance group or entity.