IAIS proposals on non-insurance activities need fine tuning: GFIA

Proposals made by the International Association of Insurance Supervisors’ (IAIS) in its consultation on assessing non-traditional non-insurance activities and products (NTNI) status are overly complex and in need of fine tuning, according to the Global Federation of Insurance Associations (GFIA).

GFIA said that although the IAIS was right to attempt to clarify the NTNI concept, the factors that lead to an activity being given NTNI status are difficult to measure. It said that this raises questions about the validity of the NTNI concept.

Consequently, GFIA suggests the IAIS should reflect further on this before pursuing the process set out in the consultation document.

“Uncertainty about the scope of NTNI makes it difficult to determine what the consequences will be for policyholders and insurers,” said Hugh Savill, chair of GFIA capital working group.

“It is particularly important that the NTNI concept does not result in insurers being discouraged from offering appropriate protection and savings products.”

Nicolas Jeanmart, chair of GFIA’s systemic risk working group, added: “It is important that the methodology for defining an insurer as a G-SII is based on an appropriate definition of systemic risk in insurance. In this sense, the methodology needs to differentiate between whether an insurer actually causes systemic risk, as opposed to being subject to the systemic risk of other financial institutions.

“In addition, an insurer’s activities must be measured in the context of the financial system as a whole, rather than relative to other insurers.

“The IAIS’ move toward absolute reference values for certain indicators, therefore, appears like a positive development, but a number of details still need to be clarified before a definitive appreciation of this change can be made.”