FEDERAL INSURANCE

OFFICE

U.S. DEPARTMENT OF THE TREASURY

International Supervisory Standards

for Insurers

Federal Advisory Committee on Insurance

November 6, 2014
FEDERAL INSURANCE OFFICE

U.S. DEPARTMENT OF THE TREASURY

Areas for Discussion

 Workstreams of the International Association of 

Insurance Supervisors

• ComFrame

• G-SIIs and Capital Standards

 U.S.-Specific Activities involving the Global 

Capital Standard (ICS), including work on a 

U.S. Proposal for the ICS

 EU-U.S. Insurance Project

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FEDERAL INSURANCE OFFICE

U.S. DEPARTMENT OF THE TREASURY

Background on the IAIS

 The International Association of Insurance Supervisors 

(IAIS) is the international standard-setting organization for 

insurance supervisors. 

 By statute, FIO coordinates and develops federal policy on 

prudential aspects of international insurance matters, 

including representing the United States at the IAIS.

 Other U.S.-based members of the IAIS include the 56 state 

insurance regulators and the Board of Governors of the 

Federal Reserve System (FRB). FIO coordinates closely and 

regularly with both. 

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FEDERAL INSURANCE OFFICE

U.S. DEPARTMENT OF THE TREASURY

Common Framework for the Supervision of IAIGs (ComFrame) 

 In July 2013 the FSB called upon the IAIS to develop a work plan for a 

comprehensive, group-wide supervisory and regulatory framework and to 

include a quantitative insurance capital standard (ICS) applicable to 

“internationally active insurance groups” (IAIGs) as defined by the IAIS.

 The IAIS had previously been developing ComFrame, a framework for the 

group-wide supervision of IAIGs, which will serve as the comprehensive 

framework called for by the FSB. 

 ComFrame is thus described as encompassing two key aspects: 

• Qualitative standards for group-wide supervision, governance and risk 

management, including recovery and resolution; these are now in field 

testing through early 2015. 

• Quantitative standards (i.e., the ICS), currently under development, will 

be subjected to several iterations of field testing through 2018. 

 The ICS has several sub-workstreams: a capital requirement; valuation 

bases; and capital resources. 

 The project plan currently calls for ComFrame to be finalized and adopted 

by the IAIS by the end of 2018. 

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FEDERAL INSURANCE OFFICE

U.S. DEPARTMENT OF THE TREASURY

Designation of Global Systemically Important Insurers (G-SIIs) 

 Also in July 2013, the FSB, in consultation with the IAIS and national 

authorities, identified nine global systemically important insurers (G-SIIs), 

three of which are based in the U.S.: AIG, MetLife and Prudential.

 The FSB determination on G-SIIs was based in large part on an IAIS assessment 

methodology that consisted of three steps: 

• Data collection from 50 insurers from 14 jurisdictions. 

• Assessment of the relative impact of failure of each G-SII candidate firm, 

emphasizing the firm’s interconnectedness and non-traditional, noninsurance activities. 

• Supervisory judgment and validation to consider insurer-specific 

circumstances not captured by the assessment approach. 

 The consideration of firms for designation as G-SIIs is an ongoing process, 

as is the assessment of the assessment methodology. 

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FEDERAL INSURANCE OFFICE

U.S. DEPARTMENT OF THE TREASURY

Policy Measures for G-SIIs

 The IAIS published, and the FSB endorsed, a set of policy measures to by 

applied to G-SIIs, including: enhanced group-wide supervision; recovery 

and resolution planning; and higher loss absorbency (HLA) requirements, 

scheduled for development through 2015 with adoption by the IAIS end 

2018.

 As a result, the FSB called upon the IAIS to develop straightforward, 

backstop capital requirements (BCR) to serve as a common baseline for GSII HLA requirements.

 The BCR is based on a risk-weighted, factor-based approach with fixed 

factors applied to various categories of risk

 The development of the BCR has been a key effort of the IAIS over the 

past 15 months, including two rounds of consultation, data collection 

from G-SIIs /IAIGs, and analysis through field testing. 

 In October, the IAIS published the BCR, the first common global capital 

standard in the insurance sector.

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FEDERAL INSURANCE OFFICE

U.S. DEPARTMENT OF THE TREASURY

U.S.-Specific Activities Involving the Global Capital Standard (ICS)

 The ICS will follow a 3-step process: standard development; testing; and 

adoption.

 The U.S. – through FIO, the FRB, and state regulators – is actively involved at 

the IAIS in developing the ICS and representing the U.S. perspective.

 FIO is also leading an effort that includes the FRB and state regulators to 

develop an ICS proposal that will address the unique needs of U.S. insurers 

and supervisors (e.g., the need to utilize U.S. accounting standards).

 Through field testing with firms from around the world, the IAIS will evaluate 

the impact, practicality, and value of the standards. Field testing will inform 

further refinement of and re-calibration of the standards.

 Through field testing, the U.S. representatives also will be able to judge the 

impact of the standards on certain U.S. companies, propose refinements, and 

better determine appropriate implementation.

 This process, as well as a broader market impact analysis, will take into 

account and value the diversity (and complexity) of the U.S. marketplace.

 A global standard will be not implemented in the U.S. without appropriate 

action by the states and/or, in certain circumstances, the Federal Reserve.

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FEDERAL INSURANCE OFFICE

U.S. DEPARTMENT OF THE TREASURY

EU-U.S. Insurance Project

 In early 2012, the European Commission (EC), the European Insurance and 

Occupational Pensions Authority (EIOPA), the NAIC and FIO agreed to 

engage in a project to contribute to an increased mutual understanding 

and enhanced cooperation between the EU and the U.S.

 The objective of the Project is to promote business opportunity, consumer 

protection and effective supervision by deepening insight into the overall 

design, function and objectives of the key aspects of the two regimes.

 The strategic “Way Forward; Objectives and Initiatives for the Future,” 

published in December 2012, laid out the common objectives and 

initiatives to be pursued over the next five years.

 In light of recent developments in the EU and the United States, and of 

progress to date on the Project, the Project’s Steering Committee 

revisited and updated the Way Forward in July 2014 and reaffirmed its 

commitment to the Project. 

 The project is moving beyond mutual understanding into concrete 

initiatives to foster improvements and greater compatibility on both sides. 

6/6/2012

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FEDERAL INSURANCE OFFICE

U.S. DEPARTMENT OF THE TREASURY

EU-U.S. Insurance Project – Priority Initiatives for 2014

 Professional secrecy/confidentiality:

• Encourage U.S. states and EU Member States to become signatories to the 

IAIS Multilateral Memorandum of Understanding 

• Review existing bilateral MoUs and consider critical points and best practices

• Identify by end 2014 the merits of an additional trans-Atlantic bilateral 

agreement, including the optimal structure(s) of such an agreement to further 

facilitate the exchange of confidential information through a covered 

agreement or other mechanisms identified by the Steering Committee

 Group Supervision:

• The U.S. side to report on the integrated effect of the total system of 

insurance supervision in the U.S. that reflects the state and federal levels.

• Share best practices/experiences of cooperation and coordination amongst 

supervisors from key colleges (public events held December 2013 and October 

2014)

• By end 2014, evaluate the use of a covered agreement to achieve the group 

supervision objectives. 

6/6/2012

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FEDERAL INSURANCE OFFICE

U.S. DEPARTMENT OF THE TREASURY

EU-U.S. Insurance Project – Priority Initiatives for 2014 (cont’d)

 Reinsurance and collateral requirements

• The U.S. side to report on progress by states in adopting the NAIC model law 

on credit for reinsurance; outline possible revisions to the model; and 

whether the model may become an accreditation standard. 

• The EU, and Treasury/FIO with the consultation of state insurance regulators, 

to take initial steps toward a covered agreement by end 2014 that for the U.S. 

would be based on the NAIC Credit for Reinsurance Model Law and 

Regulation.

 Solvency and capital requirements

• Provide a forum for the periodic bi-lateral exchange of views among experts 

from U.S. state and federal agencies and the EU with regard to the ongoing 

efforts of the IAIS to develop basic capital requirements, a high-loss 

absorbency requirement, and an insurance capital standard. 

6/6/2012

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