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IAIS consults on BCR despite industry reservations

The International Association of Insurance Supervisors (IAIS) has launched a public consultation on its proposed basic capital requirements for global systemically important insurers (G-SIIs), despite reservations from the insurance industry.

Commenting on the IAIS plans, Mike Nelson, chairman of law firm Nelson Levine de Luca & Hamilton, said: "Categorically, all insurers are uncomfortable with the idea that they have to set aside additional capital, and all insurers are leery of what that might bring."

He added that critics have flagged up the rapid rate at which the IAIS scheme is being implemented, stating: "They have suggested that this is being rushed to get something done."

The BCR is set to apply to nine insurers: Allianz, American Insurance Group (AIG), Assicurazioni Generali, Aviva, Axa, MetLife, Ping An Insurance Company of China, Prudential Financial and the UK's Prudential.

The IAIS is also aiming to develop a global insurance capital standard for all internationally active insurance groups by 2016, to be applied by 2019.

Nelson noted that another source of criticism was the IAIS's lack of authority, as the organisation has no legal power to impose its policies on national regulators. Instead, it develops global standards by the consensus of its members, which then aim to incorporate the standards into rules.

"There has been criticism that the IAIS has been conducting a lot of its work in a less transparent environment than many in the insurance industry, and some regulatory authorities, would like to see.

"Some people who feel they should be part of those discussions and meetings are not even allowed into the room," he added.

Nelson also explained that G-SII status does not equate to being designated a systemically important financial institution (Sifi) under US law, as part of the Dodd-Frank Act.

"Dodd-Frank has only designated two insurers. Both of those are listed as G-SIIs," he said, noting that these were AIG and Prudential Financial, while MetLife remained under consideration for Sifi status.

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