At the IAIS Annual Conference 2023 on the Role of Regulators in a More Inclusive Global Insurance Sector
The annual conference IAIS 2023, titled "Mind the Gap: The Role of Supervisors in Creating a More Inclusive Global Insurance Sector," took place in Tokyo this year. Simultaneously with the annual conference, IAIS working group meetings were held, also with the participation with members from the IAIS CEET Region. Mr. Shigeru Ariizumi, the newly elected chair of the IAIS Executive Committee, highlighted the importance of the collective efforts of IAIS members in addressing protection gaps related to climate change to increase resilience and maintain the financial stability of the global insurance sector.
IAIS working groups are currently focusing on three main areas: the preparation of the Global Insurance Market Report (GIMAR), annual monitoring of the consistency of the implementation of supervisory material, and discussions regarding IAIS's strategic directions for 2025-2029.
In recent years, IAIS working groups have paid significant attention to the implementation and assessment of the effectiveness of the Holistic Framework for the assessment and mitigation of systemic risk (HF), which includes the annual Global Monitoring Exercise (GME). Monitoring involves the assessment of individual insurers (Individual Insurer Monitoring, IIM), a review of the entire sector (Sector-wide Monitoring, IIM), and organizing collective discussions within IAIS working groups on identified potential systemic risks and corresponding supervisory measures.
The results indicate that the overall level of systemic risk decreased slightly in 2022 compared to the previous year. Global insurance markets, on average, weathered the challenges posed by the COVID-19 pandemic and the extended period of low interest rates in financial markets quite well. However, regulators anticipate future challenges related to geopolitical and macroeconomic risks, particularly high inflation and reduced economic growth in various jurisdictions, impacting contractual discontinuances, liquidity in the insurance sector, increased credit risk, and subsequent impacts on the profitability and solvency risk of the insurance industry. Natural catastrophes' impact on the insurance sector's operations was also highlighted, along with the growing significance of cyber risks in a context of increasing geopolitical risks. IAIS regularly publishes the results of these analyses, and the measures regulators are taking in the annual GIMAR report, which is expected to be released in December 2023.
Regarding the annual monitoring of the consistency of the implementation of supervisory material, IAIS presented a final report, which will be publicly available in December 2023. The report presents findings on the progress in implementing the HF, based on identified gaps in the November 2022 progress report. Currently, ten jurisdictions (Canada, China, Hong Kong, France, Germany, Japan, the Netherlands, Switzerland, the UK, and the US) are included in the assessment, with six more (Australia, Bermuda, Italy, Singapore, South Africa, and Spain) to be included starting in 2024. The results of the assessment indicate moderate progress for the majority of the assessed Insurance Core Principles (ICP).
In discussions about IAIS's strategic directions for 2025-2029, members' expectations included shifting the focus of IAIS activities from formulating ICP (with expected relative stability) to their implementation, which will represent a focus of the IAIS’s activities in the coming years. Monitoring and assessing key risks and trends in the global insurance sector will remain a cornerstone for coordinated supervisory responses by IAIS members through GME. Key themes to be monitored by IAIS will continue to include climate change, digital transformation, operational resilience, and cyber risks. IAIS will also continue to emphasize the role of insurance in building societal and economic resilience, focusing on supporting members in understanding and addressing protection gaps. IAIS's activities will aim to support a diverse range of members and supervisory objectives, including financial stability, prudential soundness, fair conduct, and financial inclusion. Recognizing the crucial role of stakeholders, IAIS will strengthen its engagement and expand its stakeholder network. IAIS will also focus on actively leveraging technology to achieve its goals more effectively.
The key areas of work currently being addressed by IAIS working groups also coincided with the themes of the IAIS Annual Conference 2023 panels. Participants discussed current global macroeconomic challenges and supervisory practices related to monitoring and managing these risks. They also focused on the insurance sector's response to growing climate risks, the role of supervisors in promoting diversity policies within the insurance sector, work on the global capital standard - ICS and ComFrame, planned activities for global implementation, and IAIS's priorities for the strategic period 2025-29.
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