Global: Important developments expected in global insurance standards in 2024
Source: Middle East Insurance Review | Nov 2023
Finalisation of the Insurance Capital Standard (ICS), a new global solvency standard for international insurance groups, is likely to be the most significant regulatory development for global insurers in 2024, according to a new Fitch Ratings report.
A public consultation on the ICS as a prescribed capital requirement closed on 21 September 2023 and the International Association of Insurance Supervisors (IAIS) is assessing the economic impact of the standard, which is set to take effect by end-2024.
The ICS should lead to closer alignment of capital standards for internationally active insurance groups but it is difficult to create a global standard to which all jurisdictions will agree. While many jurisdictions have adopted Solvency II-like frameworks, which the ICS broadly mirrors, the US is taking a different approach – an aggregation method to calculate insurance group capital. The IAIS is evaluating whether this should be considered an outcome-equivalent approach to the ICS.
Fitch does not expect the ICS to impose significantly different regulatory capital requirements given the widespread adoption of Solvency II-like frameworks and the likely flexibility to accommodate national market specificities and even the US aggregation method. It is therefore likely to be neutral for ratings and will not necessarily lead to fully consistent group capital calculations.
Another important regulatory development for insurers in 2024 will be the introduction of IFRS sustainability disclosures. The International Sustainability Standards Board finalised the reporting templates for these in June 2023 and insurers will have to disclose the financial materiality of climate-change risks for annual reporting periods from 1 January 2024. The disclosures will add to the growing influence of ESG considerations on insurers’ underwriting and investment strategies. M