DIVIDED OVER CAPITAL FIGURES
Regulators no closer to completing global standard nor setting firm date for its introduction
THE first global standard for investors to compare how much capital insurers from different countries hold to keep policies safe is caught in a transatlantic tussle, casting doubt on whether it is practical, say industry and regulatory officials .
Global banks have used common “Basel” capital rules for decades, and the US$180 billion (RM755.78 billion) bailout for insurer AIG during the 2007-09 financial crisis prompted regulators to embark on a similar standard for insurers in 2013 for the world’s top 50 insurers.
But four years into the work there is no completed International Capital Standard (ICS) nor a firm date for its introduction, making it harder for investors and policyholders to compare insurers from different parts of the world.
Slow progress has triggered speculation that regulators may tell insurers the process is now on hold when they meet in Kuala Lumpur in November.
The ICS is being written by the International Association of Insurance Supervisors (IAIS) whose chair, Victoria Saporta, a Bank of England executive director, said a significant step forward was taken in July when the first version of the ICS was published for field testing.
The IAIS has yet to come up with a single approach to calculating the amount of capital the world’s top 50 or so insurers will have to hold.
It is testing two “approaches” for valuing liabilities such as future payouts on policies.
The first approach is based on United States accounting rules, while the second is based on market prices, similar to European Union capital rules known as Solvency II.
But without as yet unclarified adjustments, the two approaches would come up with different capital requirements and leave investors scratching their heads. Reuters