IAIS Adopts the Insurance Capital Standard for Internationally Active Groups

What the ICS is

The ICS is a risk-based measure of capital adequacy for internationally active insurance groups (IAIGs). It forms the quantitative element of ComFrame, the IAIS's common framework for the supervision of IAIGs, and will serve as a group-wide prescribed capital requirement. That is a solvency control level below which supervisors will intervene on group capital adequacy grounds. The IAIS says 59 IAIGs have been identified by group-wide supervisors in 18 jurisdictions.

Other changes adopted

Members also adopted revisions to the Insurance Core Principles and ComFrame in three areas:

• climate risk, with limited updates to guidance on investments and enterprise risk management, and supporting material due in April 2025;
• the Holistic Framework, covering liquidity risk, counterparty risk appetite, contingency funding plans and recovery and resolution, aligned more closely with the Financial Stability Board's Key Attributes; and
• valuation and capital adequacy, mainly to improve consistency and clarity.

The US Aggregation Method

The IAIS also concluded its assessment of whether the Aggregation Method developed in the United States provides comparable outcomes to the ICS. It found that the method provides a basis for implementing the ICS with comparable outcomes, but identified two areas for convergence: the treatment of interest rate risk and the timing of supervisory intervention. The United States has committed to address both.

What happens next

The IAIS will begin developing a detailed ICS assessment methodology in 2025 and coordinate a baseline self-assessment by members in 2026. Detailed jurisdictional assessments of implementation are planned from 2027, according to the IAIS press release. Members are committed to implementing the ICP and ComFrame updates from 2025. For large cross-border insurance groups, the adoption sets the direction for group capital requirements as supervisors move towards implementation.

Sources

• International Association of Insurance Supervisors: IAIS adopts Insurance Capital Standard and other enhancements to its global standards
• International Association of Insurance Supervisors: Press release (PDF), IAIS adopts Insurance Capital Standard