IAIS systemic risk proposals “lack sufficient clarity”

Insurance Europe has criticised proposals from the International Association of Insurance Supervisors (IAIS) for a new framework for identifying and managing systemic risk in the insurance sector.

The sector body said the proposals “lack sufficient clarity” and urged the IAIS to improve them with a number of recommendations. These included conditions requiring national supervisors to work with insurers to understand the situations that could enable systemic risk and discuss alternatives to intervention; creating a clearer distinction between good practice measures that should be applied “proportionally” and more drastic measures - such as resolution - that should only be applied where there is evidence of material risks to the global financial system; and creating a definition of a “well-calibrated threshold” to identify systemically risky activities that could amplify shocks to the rest of the financial system.

Insurance Europe said that any new policy measures affecting systemic risk must be “globally-consistent and applied in a proportionate manner”. The body also said that the proposed holistic framework should ensure it preserves a level playing field between different insurance groups and jurisdictions.

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