Instead of Chilean wine in Santiago as originally planned, over 1000 attendees of the 2020 International Association of Insurance Supervisors (IAIS) Annual Conference settled in for coffee and a laptop as the virtual meeting kicked off on December 3. The IAIS is an international standard-setting body comprised of insurance supervisors and regulators from more than 200 jurisdictions. It is responsible for developing and assisting in the implementation of principles, standards and other supporting material for the supervision of the global insurance sector.
Day one of the IAIS Annual Conference featured a town hall discussion with IAIS leadership. The overarching messages focused on the impact of COVID-19 and the path forward in 2021. IAIS leaders extolled the utility of the IAIS’ post-financial crisis reforms in monitoring and responding to the COVID crisis. The results of the IAIS’ monitoring and analysis are:
- The insurance sector has been a shock absorber rather than an amplifier.
- Insurer capital has remained well above statutory and regulatory required levels.
- The insurance sector will continue to feel the economic pressures of COVID for some time, particularly the strain on investment portfolios due to the “low-for-long” interest rate environment.
IAIS leadership also emphasized that the key emerging risks the IAIS identified at the end of 2019 have only accelerated in 2020. The IAIS will publish a strategic “Roadmap for 2021-2022” with key themes including:
- Risk assessment: In 2021, the IAIS will activate a regular Global Monitoring Exercise — which was intended to be activated in 2020 — to assess global insurance market trends and detect the possible build-up of systemic risk in the global insurance sector.
- Finalization and implementation of key post-financial crisis reforms: The IAIS will continue assessment of the implementation on the Holistic Framework — a set of supervisory policy measures, a global monitoring exercise (see above) and implementation assessment activities aimed at the potential build-up of systemic risk in the global insurance sector.
The IAIS is in the final phase of developing an international group capital standard (the ICS). The IAIS learned a great deal about the ICS from COVID, which has provided a real live stress test for the ICS. The IAIS also will continue to develop criteria to assess whether alternative group capital tools (such as the Group Capital Calculation being developed in the United States) will be deemed to provide comparable outcomes to the ICS, which international supervisors would accept as a viable measure of global group capital.
- Guidance on emerging risks: Of the emerging risks identified by the IAIS, technology and climate change will be the IAIS’ key focus for the period ahead.
On day two of the Conference, the IAIS convened a panel regarding “Embedding Climate Risk Management in the Insurance Sector,” focusing on corporate governance, risk management and disclosure issues emanating from climate risk. Each of those issues are also addressed in the IAIS Application Paper on the Supervision of Climate-Related Risks in the Insurance Sector.
We look ahead to where we will next find the IAIS convening in person. Leadership announced that the IAIS Global Seminar in June will be held virtually. The IAIS hopes to have an in-person annual meeting in November but will not do so in Sydney as originally planned. The venue is yet to be decided; the easy answer would be Switzerland.