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Operationalisation of the Monitoring Period
Purpose of the ICS and the Monitoring Period
The purpose of the ICS is to create a common language for supervisory discussions of groupsolvency to enhance global convergence among group capital standards. The ultimate goal isa single ICS that includes a common methodology by which one ICS achieves comparable, ie
substantially the same, outcomes across jurisdictions. The intent has never been to raise
capital in the market, nor to indicate that the insurance sector is undercapitalised.
The purpose of the five-year monitoring period is to monitor the performance of the ICS overa period of time, and not the capital adequacy of IAIGs. For this purpose, the monitoring period
is intended to be a period of stability for the reference ICS and the additional reporting. This
does not preclude possible clarifications/refinements and correction of major flaws orunintended consequences identified during the monitoring period to improve the ongoingdevelopment of the ICS.
Prior to the adoption of the ICS as a prescribed capital requirement (PCR) 1, there will be apublic consultation on the ICS and the IAIS will undertake an economic impact assessment.
A main objective of the monitoring period is to receive feedback from supervisors and IAIGs
on the reference ICS and, if applicable, additional reporting. The assessment by group-wide
supervisors and supervisory colleges should include:•A comparison with existing group capital standards or calculations that are indevelopment;•The extent to which material risks of the IAIG are captured;•The appropriateness and practicality of the calculations required; and•Any difficulties in implementing the measure (ie applying the specifications) by the IAIG
or the supervisor.

During the monitoring period, the ICS will be used for confidential reporting to group-wide
supervisors and discussion in supervisory colleges. It will not be used as a PCR (that is, theICS results will not be used as a basis to trigger supervisory action). Therefore, during themonitoring period, IAIGs are not expected to manage their business to the ICS since it is nota PCR. ICS Version 2.0 for the monitoring period is not for decision making by supervisors,nor is it intended for use by third parties. In this context, the IAIS encourages IAIGs not todisclose their ICS Version 2.0 results to any third parties.
The feedback received during the monitoring period will be used to further improve the ICS.
In addition to the feedback from supervisors, the IAIS will consider feedback from stakeholder
engagement, the public consultation and the results of the economic impact assessment, all
1 Insurance Core Principle (ICP) 17.4 defines a PCR as a solvency control level above

which thesupervisor does not intervene on capital adequacy grounds. As the ICS is designed as a minimum
standard, national supervisory authorities may elect to take a more prudent approach and set a PCR
that is higher than the ICS PCR.
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of which could result in changes to ICS Version 2.0. During the monitoring period, the IAIS
intends to maintain the same level of engagement with stakeholders as it had during fieldtesting.
Once implemented as a PCR at the end of the monitoring period, the ICS will be a measureof capital adequacy for IAIGs. It will constitute the minimum standard to be achieved and one
which the supervisors represented in the IAIS will implement or propose to implement taking
into account specific market circumstances in their respective jurisdictions. 2 The ICS will be aminimum standard for a group PCR and not a legal entity PCR.
ICS Version 2.0: Monitoring Period
The monitoring period marks a different phase of the ICS project. This section sets out thetiming and expectations for the monitoring period, focusing on the roles of the IAIS andsupervisors during this five year period.
The following figure provides an overview of the timeline and activities related to the annual
reporting and analysis during the first year of the monitoring period. Subsequent years may
be adjusted following the experience of the first year.
Figure 1: Annual Reporting and Analysis during the Monitoring Period

The following flowchart provides an illustration of how the monitoring period is envisaged towork.

2The IAIS is a standard setting body and does not have any legal power to directly mandate theimplementation of the ICS as a PCR in jurisdictions. However, the IAIS By-Laws contain the following
clause at Article 6(6):(6) Members commit to:(a) pursue the mission of the Association;(b) implement IAIS supervisory material taking into account specific market circumstances; and(c) undergo periodic self-assessments and peer reviews.

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Figure 2: Monitoring period process

IAIG(or VolunteerGroup)

Quantitative Information

Quantitative Information
Group-widesupervisor(GWS)

Supervisory college(for each IAIG)

IAIS Capital andSolvency WG

Qualitative Information

IAIS Policy
DevelopmentCommittee

Global roundtableof supervisors

Recommendations for clarifications/refinements andcorrection of major flaws or unintended consequences

IAIS ExCoICS for implementation as aGroup PCR

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Process for the Monitoring Period
As depicted in Figure 2, the process for the monitoring period will be very similar to the process
followed during field testing. The left side of the figure is identical to the process followed
during field testing. The main difference is the addition of the right side of the figure, which
includes discussion of the ICS results within supervisory colleges and an annual global
roundtable of supervisors. The arrows in the figure represent interactions and feedback loops
between the various players in the monitoring period.
Any sharing of information within the feedback loops depicted in the figure will be done understrict confidentiality rules that will ensure the same level of data confidentiality as during fieldtesting.
The following sections describe the roles of group-wide supervisors, supervisory colleges andthe IAIS during the monitoring period and how those roles complement each other.
Role of the group-wide supervisor
Similar to ICS field testing, it is the GWS, and not the IAIG, that will submit the data templateto the IAIS for continued monitoring of the ICS. Prior to submission, the GWS should performreasonableness checks, at a minimum, on the data submission, to the extent it can do sounder its jurisdictional law. Once the GWS is comfortable with the content of the datasubmission, it will provide a report of summary results to the supervisory college of the IAIG
for discussion.
There will be a feedback loop between the GWS and the IAIS, since both have access to theconfidential data provided by the IAIG. The GWS plays an important role in providing
quantitative and qualitative feedback to the IAIS regarding the appropriateness of thereference ICS and any additional reporting.
Role of the IAIS
A capital and solvency working group (the “Working Group”) will be maintained by the IAISwith the mandate of facilitating and organising the annual confidential reporting of thereference ICS and, at the option of the group-wide supervisor, additional reporting. TheWorking Group will also further develop GAAP Plus (based on IFRS, US GAAP and ChineseGAAP) during the first two years of the monitoring period 3 and perform data collection
exercises, as needed, aimed at refining calibration for ICS risk charges at the end of themonitoring period.
A dedicated analysis team will assess on an annual basis the outcome of the reference ICS
calculations, as well as the additional reporting(s). This will require interactions with IAIGs, via
GWSs, for data cleaning and technical feedback purposes. The Working Group will meet
regularly to discuss the quantitative results prepared by the analysis team, as well as feedback
from GWSs, supervisory colleges and IAIGs to determine if there are material issues thatshould be addressed. The Working Group will regularly inform the IAIS about the results ofthe monitoring period and make recommendations to the Policy Development Committee(PDC) on clarifications/refinements and correction of major flaws or unintended
consequences, where appropriate, before the implementation of ICS as a PCR. The Working
Group will also maintain interactions with IAIGs through dedicated workshops in order to3 Development and field testing will continue in 2020 and 2021 for GAAP Plus based on IFRS, US

GAAP and Chinese GAAP with a three-year monitoring period beginning in 2022.

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Page 4 of 5receive feedback on the reference ICS and any additional reporting during the monitoring
period.
Supervisor engagement will be organised in the form of a network that combines in-person
meetings, digital tools and questionnaires. Different forms of engagement will be used toensure that all involved supervisors are able to provide feedback in a convenient and costeffective way.
An Annual Global Roundtable will be organised. This will be an opportunity for all interested
supervisors to discuss the experience of assessing the reference ICS and additional reporting
among fellow supervisors (home and host). The purpose of the Global Roundtable is todiscuss possible clarifications/refinements, major flaws or unintended consequences thathave been identified, in order to improve the ongoing development of the ICS. This output of
the Global Roundtable (with Secretariat support) would be a report for PDC on the experienceof front-line supervisors with respect to the reference ICS and additional reporting.
During the first year of the monitoring period, an ICS Education Program will be developed inorder to assist those front-line supervisors that will perform the assessment of the reference
ICS and additional reporting. The ICS Education Program is envisioned to consist of a seriesof webinars on the ICS components, as well as regional Q&A sessions with supervisors andother online tools.
Role of supervisory collegesSupervisory colleges play a key role during the monitoring period. The summary results
provided by the GWS should be sufficient to enable the supervisory college to discuss andassess the effectiveness of the reference ICS and additional reporting. Each supervisory
college will only discuss the results of its IAIG. The supervisory college will not discuss theresults of other IAIGs, nor have access to any other individual data.
Supervisory college discussions should begin after the GWS and IAIS have had an opportunity
to review the data. Supervisory college discussions should take place in time to be consideredin the annual process (Global Roundtable, IAIS Parent Committee Meetings) ahead of thenext year of confidential reporting.
The IAIS will collect feedback and views from supervisors, such as the added value of the ICS
within supervisory colleges (eg better understanding of risks, better cross-bordercomparability, etc.). The IAIS will develop guidance and a targeted questionnaire for feedback
in order to facilitate discussion in supervisory colleges and receive consistent feedback. The
IAIS will provide a secure means to collect feedback from GWSs and host supervisors basedon discussions in individual IAIG supervisory colleges.

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