IAIS Approves Global Insurance Capital Standard and Completes US Aggregation Method Review

The International Association of Insurance Supervisors (IAIS) has approved the final version of the Insurance Capital Standard (ICS), a global capital requirement designed to enhance the financial stability and resilience of internationally active insurance groups (IAIGs). The ICS establishes a consistent framework for assessing capital adequacy, helping IAIGs navigate the complexities of operating across multiple jurisdictions. It will be recommended for adoption at the IAIS Annual General Meeting on December 5, 2024, in Cape Town, South Africa.

IAIGs are large insurance groups with significant cross-border operations. These companies face varying regulatory environments in different countries, making a global standard like the ICS critical for consistency and transparency. Smaller, domestically focused insurers are not required to adopt the ICS, though the principles may influence local regulatory standards over time. The ICS is part of the IAIS Common Framework (ComFrame) for supervising IAIGs, which also includes governance and risk management standards adopted in 2019.

In a parallel development, the IAIS completed its comparability assessment of the Aggregation Method (AM), a US-developed alternative to the ICS. The IAIS concluded that the US AM can deliver results comparable to the ICS, provided adjustments are made in areas like interest rate risk and supervisory intervention timing. The United States has committed to addressing these areas as part of the AM implementation, which will be assessed starting in 2026 alongside other jurisdictions' ICS implementations.

"This approval marks a landmark achievement for the IAIS, demonstrating our commitment to strengthening international insurance supervision," said IAIS Executive Committee Chair Shigeru Ariizumi.

The ICS represents the quantitative aspect of ComFrame and aims to provide a consistent approach to capital adequacy. Through the alignment of regulatory standards, the ICS seeks to foster stability and enhance trust in the global insurance sector. For IAIGs, adoption of the ICS will mean adhering to stricter and more uniform capital requirements, ensuring they remain robust in the face of global financial risks.

The IAIS has also emphasized the importance of collaboration with member jurisdictions to ensure a smooth transition. The ICS and AM will be presented in detail at the IAIS Annual Conference on December 5–6 in Cape Town, where further guidance on implementation will be provided.