International prudential developments

European insurers call for greater clarity and improvements to draft IAIS criteria on comparability of Aggregation Method and ICS


Insurance Europe has responded to a consultation conducted by the International Association of Insurance Supervisors (IAIS) on draft criteria to assess whether the Aggregation Method (AM) provides comparable outcomes to the Insurance Capital Standard (ICS).

Insurance Europe supports the ICS’s objective to create a high-quality and robust global insurance standard that promotes a sound and level global regulatory playing field. While Insurance Europe supports the aim to take a quantitative approach to the comparability assessment, a number of key elements must be changed or clarified before the criteria are finalised and the comparability assessment begins.

These include:

  • The fact that the AM can only be considered to produce comparable outcomes if any group’s prescribed capital requirement (PCR) under the AM would be breached at similar points in time as its PCR under the ICS, leading to much the same supervisory outcomes.
  • All criteria must be considered essential and all should be sufficiently met to achieve comparability.
  • The fact that short-term market fluctuations cannot be excluded from the assessment.
  • It is vital to compare outcomes under a suitable range of scenarios.
  • A suitable sample of real company data should be included in the study. In addition, it may be necessary to also apply scenarios to model companies.
  • It is essential to clarify in advance which factors will guide the IAIS when drawing a final conclusion, particularly with regards to the definition and interpretation of certain terms.
  • The fact that the ICS is not yet final and must evolve after the monitoring period ends in 2024. Therefore, the comparability assessment will need to be updated using the improved ICS.
  • If the AM is found to be comparable following this assessment, Insurance Europe takes the view that the assessment would need to be updated on a regular basis to provide assurance over time (model drift) and capture evolutions in the ICS and the AM frameworks.

It is also worth noting that other aspects of the ICS project remain under development and consideration by the IAIS. Insurance Europe’s key high-level views on these aspects, therefore, also remain relevant.