Assessment of Insurance Supervision
The International Association of Insurance Supervisors (IAIS) has developed the Insurance Core Principles (IAIS 2000) as the key global standard for prudential regulation and supervision for the insurance sector. The objective of the Insurance Core Principles (ICPs), from the perspective of the standard setters, is to act as a diagnostic tool to assist in improving supervision globally. To this end, the assessment of ICPs should include prioritized recommendations that can serve as a roadmap for a reform agenda. Fundamentally, insurance supervisors around the world have been concerned about improving insurance supervision and bringing about a basic level of effectiveness in all jurisdictions by facilitating assessments (both internal and external) that are consistent and comprehensive. The global nature of insurance markets (particularly the presence of conglomerates), the expansion of cross-border transactions, the global nature of reinsurance markets, and the presence of active offshore centers all call for some convergence of regulatory practices and norms to ensure effectiveness of regulations and a level playing field.
The ICPs were updated through an extensive process culminating in a new version in October 2003 (IAIS 2003a). This version sets out the key elements of effective regulation and supervision for the insurance sector and elaborates the requirements on the law, the supervisory process, and the functions and operations of market participants so as to deliver an effective and positive contribution from the insurance sector to the wider
economy and to the long-term well-being of the population. The October 2003 version of ICP incorporates additional core principles, including adequacy of risk-management operations, AML-CFT (the subject of a separate standard; see later parts of this Handbook), and transparency of insurance supervision policies (also the subject of a separate standard; see later parts of this Handbook). Moreover, the new version contains additional, more specific criteria for assessment purposes as it draws on earlier assessment experience under the Financial Sector Assessment Program and other previously issued guidelines by IAIS outside of the ICPs. For example, the principles also address issues such as management of risk and consumer protection, and they incorporate as essential criteria “principles on capital adequacy and solvency” (IAIS 2002), which was adopted in 2002. The relevance of effective regulation and supervision of insurers for stability and development, the scope of the new ICPs, and their use in assessments and lessons of assessment experience are summarized in the following sections.