ICS - Insurance Capital Standards - IAIS

  • 2015 - IAIS - IAIS Capital-related Stakeholder Meeting - 83p
    • Feedback from 2014 field testing
      • Mainly concerns with volatility and harm to the long term nature of insurance business
    • Additional feedback received from industry
    • Long duration discount rates should not be extrapolated from extremely limited tenors
    • Use more stable long-term rate based on a macroeconomic or historical approach
    • Transition period between liquid maturities and long term rate
  • 2019 1114 - IAIS - Technical Note on ICS Version 2.0 for the monitoring period - 4p
  • home.treasury.gov/system/files/311/2020-FIO-Annual-Report.pdf
    • 73 Certain insurers use derivatives to mitigate interest rate risk. See, e.g., NAIC & CIPR, U.S. Insurers’ Derivative Exposure Increased 9% in 2018 (2019), https://www.naic.org/capital_markets_archive/special_report_191217.pdf.
      74 Although interest rates used in discounting reserves are prescribed under statutory accounting principles, life insurers must complete asset adequacy testing as part of their statement of actuarial review required in annual regulatory filings. Reserve adequacy is determined by calculating the difference between invested assets and thepresent value of future premiums, less the present value of future claims under various interest rate path scenarios. See, e.g., American Academy of Actuaries, Asset Adequacy Analysis (September 2017),
      https://www.actuary.org/sites/default/files/files/publications/Asset_Adequacy_PN_092517.pdf
    • 75 American Academy of Actuaries, Report of the American Academy of Actuaries’ C3 Life and Annuity Capital Work Group On RBC C3 Requirements for Life Products (September 2009), 4-6, https://naiccms.org/sites/default/files/inline-files/committees_e_capad_lrbc_AAA_0909_report_rbc.pdf.
  • 2020 - CEPR - Regulatory Forbearance in the U.S. Insurance Industry: The Effects of Eliminating Capital Requirements - 53p
  • 2021 12 - AP - Exploring the market risk profiles of U.S. and European life insurers - 47p
  • The Insurance Capital Standard (ICS) is being developed as a consolidated group-wide capital standard for IAIGs.
  • Aggregation Method - NAIC
  • Basel
  • Building Block Approach - FRB
  • BCR - Basic - IAIS
  • GAAP Plus
  • Group Capital Calculation (GCC) - NAIC
  • ICS - IAIS
  • ORSA
  • RBC - NAIC
  • Senate passed S. 2270, “the Insurance Capital Standards Clarification Act of 2014
  • Collins Amendment
  • IAIS - Insurance Capital Standards
  • AAA - American Academy of Actuaries
    • actuary.org/node/13808 - Insurance Capital Standards
    • 2021 - AAA - Aggregating Regulatory Capital Requirements across Jurisdictions Theoretical and Practical Considerations, Research Paper 2021, No. 1 - 60p
  • ACLI - American Council of Life Insurers
  • BIS - Bank for International Settlements
  • DOT - Department of the Treasury
    • FIO - Federal Insurance Office
      • FIO Study - ICS - <??>
        • 2020 1008 - Federal Insurance Office Study on the Insurance Capital Standard
          Posted by the Department of the Treasury on Oct 8, 2020 - [link]

          • 14 Comments
      • FACI - Federal Advisory Committee on Insurance
        • 2021 0210 - FACI - FACI International Subcommittee - Perspectives on the Request for Information (RFI) on a FIO Study of the ICS - 22p
          • 2021 0216 - Birny Birnbaum (FACI Member) - Dissenting View of Birny Birnbaum - FACI International Subcommittee Recommendations - 4p
        • 2021 - FACI -  4p
          • re: FIO Study - ICS -
            • The FIO study should be analytical and focus on the performance of the AM relative to the MAV ICS
            • The study should explore the themes identified across the RFI responses and demonstrate how they would be treated/evolve under the AM and MAV ICS individually and relative to one another – e.g., effects for long-duration business and investment, procyclicality, implementation costs, consumer protection, etc.
            • The study should assess the performance of the AM relative to the MAV ICS over time – covering periods or scenarios sufficient to capture economic cycles and catastrophic financial events.
            • Recognizing the respective mandates are different, the FIO study should complement rather than duplicate the study being undertaken by the Federal Reserve Board’s Insurance Policy Advisory Committee (IPAC)
  • FRB - Federal Reserve Board
    • 2019 09 - FRB - Comparing Capital Requirements in Different Regulatory Frameworks - 40p
    • 2021 0526 - FRB to NAIC - Remarks by Randal K. Quarles, Vice Chair for Supervision, Board of Governors of the Federal Reserve System, via prerecorded video to NAIC International Insurance Forum - 9p
    •  IPAC
      • 2022 0502 - IPAC - IPAC Working Group - Comment/Feedback on the Federal Reserve's Proposed Framework for the Supervision of Insurance Organizations - 15p
      • 2022 06 - IPAC Report / FRB - IPAC to FRB - Potential Impact of the International Association of Insurance Supervisors' Insurance Capital Standard on the Life Insurance Industry, Policyholders and Markets in the United States - 68p  --  <BonkNote>
        • Milliman - Presentation on the Insurance Policy Advisory Committee (IPAC) Report on the Potential Impact of the ICS on the U.S. Life Insurance Industry, Policyholders and Markets - 32p
  • GAO - Government Accountability Office
    • 1990 05 - GAO - European Community: U.S. Financial Services’ Competitiveness Under the Single Market Program - 76p  --  [link]
    • 1991 03 - GAO - Deposit Insurance: A Strategy for Reform - 220p
    • 1992 03 - GAO - Securities Markets: Challenges to Harmonizing International Capital Standards Remain - 72p  --  [link]
    • 1994 03 - GAO - International Banking: Strengthening the Framework for Supervising International Banks -  82p  --  [link]
    • 2015 0625 - GAO - International Insurance Capital Standards: Collaboration among U.S. Stakeholders Has Improved but Could Be Enhanced - GAO-15-534 - gao.gov/products/gao-15-534?source=ra
  • IASB/FASB
  • NAIC
  • SOA - Society of Actuaries
    • soa.org/search/insurance-capital-standards
    • 2011 - SOA - Recommended Readings - 2p
      • New Basel III Rules are Announced: While most of us will not live under banking rules, the regulators are talking across sectors more and more.
      • You can be certain that they will be looking to eliminate any regulatory arbitrage opportunities across sectors in the future, which means that insurance capital standards will be compared very carefully to these bank standards. 
    • 2015 - SOA - Life Insurance Regulatory Structures and Strategy: EU Compared with US, Society of Actuaries - 92p
    • 2019 - SOA - Insurance Capital Standards: Changes on the Horizon - 4p
  • Other
  • 2016 0421 - Actuarial Association of Europe - IAIS Global Capital Standards - 37p
  • Academic Papers -
    • 2021 - AP - Asset concentration risk and insurance solvency regulation, Fabian Regele, Helmut Gründl - 45p
  • FRB / DOT -
    • 2019 09 - FRB / DOT - Report to the Congress: Efforts of the U.S. Department of the Treasury and the Board of Governors of the Federal Reserve System with respect to Global Insurance Regulatory or Supervisory Forums in 2018 - 24p
    • 2020 12 - FRB / DOT - Report To The Congress: Efforts of the U.S. Department of the Treasury and the Board of Governors of the Federal Reserve System with Respect to Global Insurance Regulatory or Supervisory Forums in 2019 - 23p
    • 2022 02 - FRB / DOT - Report to Congress: Engagement in Global Insurance Regulatory or Supervisory Forums in 2020 - 24p
  • NAMIC
    • 2016 0104 - NAMIC / FSB - RE: National Association of Mutual Insurance Companies Submission on Proposed Framework for Post-Implementation Evaluation of the Effects of the G20 Financial Regulatory Reforms. - 8p
  • PWC -
    • 2016 11 - PWC - Aspirations and realities: Gauging the impact of the ICS on capital management - 16p
  • The purpose of the ICS is to create a common language for supervisory discussions of group solvency to enhance global convergence among group capital standards.
  • The ultimate goal is a single ICS that includes a common methodology by which one ICS achieves comparable, ie substantially the same, outcomes across jurisdictions

2019 1120 - IAIS - Explanatory note on the Insurance Capital Standard (ICS) and Comparability Assessment - 4p

  • 2014 - NAIC - NAIC formed the ComFrame Development and Analysis (G) Working Group (CDAWG) - Kevin McCarty (FL)
  • 2013 1212 - GOV (House) - International Finance System, Part 1 (CSPAN)
    • [PDF- , VIDEO-CSPAN]
    • 01:10:00 - Neugebauer / Lew - FIO, Late Reports, McRaith, FSOC, Banking vs Insurance, US v Europe, Complicated issue, states, feds, opening the conversation, G-20, Capital Standards
    • 01:19:00 - Bill Foster (D-IL) - Banking Capital Standards to Insurance, FSOC
  • 2014 0408 - GOV (House) - Who's In Your Wallet: Examining How Washington Red Tape Impairs Economic Freedom
    • [PDF-629p, VIDEO-YouTube]
    • Clip - [VIDEO-YouTube] - Congressman Randy Neugebauer questions Scott Alvarez, General Counsel for the Federal Reserve Board of Governors, about capital standards for insurance.
      • Does the Fed support international standards being imposed on our domestic industry?
      • What objective evidence was used to justify global capital standards for insurers?
      • What cost benefit analysis was done?
      • How will the Fed work with state regulators to get their input on this issue?
    • House - Committee on Financial Services
  • S. 2270 - Insurance Capital Standards Clarification Act of 2014.
  • Equity Risk Premium - ICS - Capital Standards
    • 2019 - AIA /IAIS - Three Bucket Approach - 9p
      • Currently the Insurance Capital Standard (ICS) makes no allowance for the spread over the risk free rate that is produced by equities
      • This is despite the fact that it is widely accepted that equities earn more than risk-free assets over the long term
      • This spread is commonly referred to as the equity risk premium and has been widely discussed in academia by financial economists and other experts