In November 2019, the IAIS adopted the Holistic Framework for the assessment and mitigation of systemic risk in the insurance sector (“Holistic Framework”), for implementation from the beginning of 2020. The Holistic Framework is an integrated set of supervisory policy measures, a Global Monitoring Exercise (GME) and implementation assessment activities.
As part of the Holistic Framework, the IAIS enhanced a set of supervisory policy measures for macroprudential purposes, designed to increase the overall resilience of the insurance sector and help prevent insurance sector vulnerabilities and exposures from developing into systemic risk. When a potential systemic risk is detected, supervisory powers of intervention enable a prompt and appropriate response. The Holistic Framework related supervisory material is integrated into the ICPs and ComFrame.
The GME is designed to assess global insurance market trends and developments and detect the possible build-up of systemic risk in the global insurance sector. This includes, at an individual insurer and sector-wide level, a collective discussion at the IAIS on the assessment of potential systemic risks and appropriate supervisory responses and reporting to the Financial Stability Board (FSB) on the outcomes. The IAIS also shares the outcomes of the GME each year with the general public in its Global Insurance Market Report.The GME includes liquidity metrics as an ancillary indicator. The liquidity metrics serve as a tool to facilitate the IAIS’ monitoring of the global insurance sector liquidity risk and to provide further insight on insurers’ liquidity exposures as part of the Individual Insurer Monitoring.
A final key element of the Holistic Framework is the IAIS’s assessment of the consistent implementation of the Holistic Framework supervisory material; the enhanced supervisory policy measures and powers of intervention. For more information on this element, please visit our page on implementation assessment.