Insurance Europe has responded to a consultation by the International Association of Insurance Supervisors (IAIS) on the Insurance Capital Standard (ICS) 1.0.
In its response, Insurance Europe stressed the need for the ICS to be developed and tested on a consistent basis across internationally active insurance groups (IAIGs). This would ensure that the ICS is a risk-based framework in which same risks are measured in the same way, no matter which jurisdiction a specific IAIG is based.
Therefore, Insurance Europe said that the valuation basis must be as comparable and convergent as possible, and able to generate the same outcomes for required and available capital.
Insurance Europe expressed support for the IAIS objective of avoiding excessive balance sheet volatility, caused by short-term market fluctuations. It also noted that asset liability management (ALM) practices are different across insurers and that they should have an impact on the valuation of the liabilities.
More specifically, for those assets and liabilities subject to the same ALM approach, a similar valuation is needed to ensure consistency. As such, Insurance Europe highlighted the need for a set of alternatives on valuation of liabilities that are, together, able to cover and reflect differences in ALM across companies.
Insurance Europe also reiterated its concerns on the introduction of a margin over current estimate (MOCE), as well as strong support for internal models to be considered as alternatives to the ICS standard method.