The International Association of Insurance Supervisors (IAIS) has on 4 April published its report on the targeted jurisdictional assessment (TJA) of the implementation of the Holistic Framework supervisory material. The Holistic Framework for the assessment and mitigation of systemic risk in the insurance sector (Holistic Framework) was adopted by the IAIS in November 2019 and endorsed in December 2022 by the Financial Stability Board. The Holistic Framework recognises that systemic risk may arise not only from the distress or disorderly failure of an individual insurer, but also from insurers’ collective exposures and activities at a sector-wide level. It consists of an integrated set of macroprudential supervisory policy measures, a Global Monitoring Exercise and – as a key element – implementation assessment activities.
“I am pleased to report that overall, the assessment results demonstrate strong implementation of the Holistic Framework standards, with good levels of observance across jurisdictions,” said Vicky Saporta, IAIS Executive Committee Chair. “This indicates enhanced macroprudential supervisory practices to assess and mitigate the potential build-up of systemic risks in the insurance sector”.
The TJA was carried out in 2021-2022 in 10 major insurance markets: Canada, China Hong Kong, China, France, Germany, Japan, the Netherlands, Switzerland, the United Kingdom and the United States. The exercise included a desk-based assessment and an on-site component to ensure in-depth verification of described supervisory practices. It assessed Holistic Framework standards, in particular: requirements on macroprudential supervision, liquidity risk management and disclosures, supervisory powers of intervention, crisis management and planning, including recovery and resolution frameworks.
Almost all jurisdictions received an observance level of either “Observed” or “Largely Observed” for at least 70% of the standards. Overall, the number of standards that were “Partly Observed” is less than 15% for all jurisdictions and even below 5% for three jurisdictions.
While some gaps in implementation were identified for follow-up, there is continued progress on the implementation of the Holistic Framework standards in most jurisdictions assessed. For example, in the area of recovery and resolution, the report formulates areas for follow-up for the short- and medium-term. The report also provides examples, which serve to illustrate implementation practices observed during the assessment.
“Implementation assessment activities aim to promote globally consistent and effective implementation of the IAIS supervisory material,” said Romain Paserot, Acting IAIS Secretary General. “This is critical to supporting financial stability because the potential build-up of systemic risk may be global in nature. Accordingly, the IAIS will continue monitoring implementation progress, including in other jurisdictions, to inform its and the FSB’s considerations of systemic risk in the insurance sector.”
Read the report here.
Source: IAIS
