09 October 2013

Risk.net: National authorities have 'moral obligation' to introduce systemic risk measures - IAIS secretary general

The FSB has a "clear political mandate" to impose enhanced measures for the regulation of SIIs, which national authorities should respect, insists Yoshihiro Kawai, secretary general of the IAIS.

The publication of a list of nine global systemically important insurers (G-SIIs) by the FSB, and the IAIS's accompanying policy measures for their enhanced supervision, sparked controversy in July, with market participants questioning the transparency of the assessment process and the calibration of capital requirements for designated firms.

The FSB and IAIS have also faced criticism that they lack the legal power to enforce G-SII measures, and doubts over whether a uniform implementation of the new regulatory standards is possible. But Kawai argues the political will exists to augment the supervision of systemically important firms to ensure G-SII measures are introduced worldwide. Mechanisms exist to name and shame national authorities that fail to implement these agreed-upon standards, Kawai says.

But others do not share Kawai's confidence that IAIS standards will be applied as envisioned. Kevin Nixon, managing director, regulatory affairs at the Institute of International Finance, says that while he is confident the resolve of the G20 to tackle systemic risk will not weaken any time soon, he believes the IAIS could still run into trouble implementing G-SII measures.

The IAIS will attempt to counter this trend by laying out simple policy requirements for national regulators to implement for designated firms. Today it confirmed that G-SIIs will be subject to straightforward backstop capital requirements (BCRs) from November 2014. These are intended to form a basis upon which higher loss absorbency (HLA) requirements will be calibrated.

In addition, work is underway to develop a global insurance capital standard (ICS) for all internationally active insurance groups (IAIGs). This new standard will be a risk-based measure and will apply to all firms that fall under the remit of the common framework for the supervision of IAIGs (ComFrame).

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