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International Insurance Regulatory Issues

International Insurance Regulatory Issues. 10th Annual Insurance Public Policy Summit “Confronting New Challenges in U.S. and International Regulation”. Andrés Portilla Director, Regulatory Affairs Department March 12, 2014. List of Current IIF Insurance Members.

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International Insurance Regulatory Issues

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  1. International Insurance Regulatory Issues 10th Annual Insurance Public Policy Summit “Confronting New Challenges in U.S. and International Regulation” Andrés Portilla Director, Regulatory Affairs Department March 12, 2014

  2. List of Current IIF Insurance Members Currently the IIF has 19 insurance members headquartered in 10 countries, including all 9 G-SIIs designated in July 2013: • . • Swiss Re • Zurich Insurance Group • Allianz SE • Prudential Financial • AIG • MetLife • Generali • AXA Group • Ping An Insurance • Principal Financial Group • Prudential plc • Manulife Financial • Reaseguradora Patria • Aflac • China Taiping Insurance Group Co. • Aegon N.V. • China Life Insurance (Group) • Aviva plc • MassMutual Life Insurance Company

  3. The Global Framework • G20 Countries: Argentina, Australia, Brazil, Canada, China, France, Germany, India, Indonesia, Italy, Japan, the Republic of Korea, Mexico, Russia, Saudi Arabia, South Africa, Turkey, the United Kingdom, EEUU and the European Union G20 FSB (Financial Stability Board) BCBS IOSCO IAIS (International Organization of Securities Commissions) (International Association of Insurance Supervisors) (Basel Committee on Banking Supervision)

  4. International Regulatory Agenda • One key objective: to develop a harmonized, globally consistent regulatory framework for internationally active insurance groups • Two key players: Financial Stability Board (FSB) and the IAIS • Three main projects: • Basic Capital Requirement (BCR) • ComFrame (Common Framework for the Supervision of IAIGs) • Global Insurance Capital Standard (ICS)

  5. Global Insurance Regulatory Framework Overview ICPs ComFrame expands on ICPs All Insurers ComFrame Capital Adequacy Component of ComFrame IAIGs Step 3: ICS (to be developed by end of 2016) G-SIIs Step 2: HLA(to be developed by end of 2015) Step 1: BCR (to be developed by end of 2014) Recovery and Resolution G-SII Policy Measures Enhance Group-wide Supervision

  6. Global Systemically Important Insurers(G-SIIs)Policy Measures Overview Introduction Implementation Timeline On July 18, 2013, IAIS announced that it had developed a framework of policy measures for; however, the proposed HLA measures will be subject to further consultation before they are finalized in 2015 in advance of the proposed implementation date of 2019. Components Components • Enhanced Supervision • Recovery and Resolution • Higher Loss Absorbency • Enhanced Supervision • Recovery and Resolution • Higher Loss Absorbency

  7. Expert Inputs Concludes . Second BCR Consultation Starts BCR Field Test Ends G20 Endorses BCR Proposal BCR Field Testing Starts Jan Apr Feb May Jun Aug Jul Sep Mar Nov Oct Dec Basic Capital Requirements(BCR) and Higher Loss Absorbency(HLA) IAIS approves BCR Proposal BCR FSB Reviews BCR Proposal HLA Analysis on Field Test Results Concludes. Second BCR Consultation Ends First BCR Consultation Ends As a foundation for HLA requirements for G-SIIs, the IAIS will develop straightforward, basic capital requirements to apply to all group activities, including non-insurance subsidiaries. The BCR is intended to balance between simplicity and risk sensitivity, as well as provide a more comparable foundation for the HLA than local capital requirements. Based on the foundation of the BCR, the higher loss absorbency requirements will focus on systemic risks and non-traditional non-insurance (NTNI) activities as the second step towards the ICS. The HLA will be completed in 2015 and implemented to G-SIIs from 2019. BCR 2014 Development Timeline

  8. Common Framework for the Supervision of Internationally Active Insurance Groups (ComFrame) Introduction Three Modules of ComFrame ComFrame is a set of international supervisory requirements focusing on the effective group-wide supervision of IAIGs. ComFrame is built and expands upon the high level requirements and guidance currently set out in the IAIS ICPs, which generally apply on both a legal entity and group-wide level. • ComFrame consists of the following three modules: • Module one: The Scope of ComFrame • Module two: The IAIG (including capital adequacy requirements) • Module three: The Supervisor (including establishment of supervisory colleges) ComFrame Development Timeline

  9. Global Insurance Capital Standards(ICS) Introduction Development Steps of the ICS • The IAIS has committed to develop the ICS in the following three steps: • The first step is to develop ICS by end 2016. • The second step is to test and refine the framework by 2018. • The third step is to implement it globally starting in 2019. On October 9, 2013, the IAIS announced that it is committed to develop a risk based ICS by the end of 2016, followed by a two-year period of testing and refinement with supervisors and IAIGs. The ICS is scheduled to be implemented beginning in 2019. After completion, the ICS will be included in ComFrame replacing the content of Module 2 Element 5 Capital Adequacy Assessment. ICS Development Timeline

  10. International Insurance Regulatory Issues 10th Annual Insurance Public Policy Summit “Confronting New Challenges in U.S. and International Regulation” Andrés Portilla Director, Regulatory Affairs Department aportilla@iif.com

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