WASHINGTON — The Property Casualty Insurers Association of America (PCI) submitted comments on the International Association of Insurance Supervisors’ (IAIS) Insurance Capital Standard (ICS) Version 1.0. The following statement can be attributed to Steve Broadie, PCI’s vice president, financial policy.
“PCI has significant concerns about the development of the IAIS’ proposed international insurance capital standard,” said Broadie. “We don’t believe there is a need for a global insurance group capital requirement. As the IAIS moves ahead with this project, PCI urges that the IAIS recognize existing group capital frameworks that achieve comparable results in policyholder protection as a suitable implementation of the ICS framework. This will avoid both significant additional implementation costs and conflicts among differing group capital assessments.”
While PCI supports the IAIS draft’s inclusion of the “GAAP Plus” valuation methodology that allows internationally active insurance groups to use their home country’s current accounting system’s method of valuing assets and liabilities, Broadie commented that “GAAP Plus should continue to allow non-life claims reserves to be valued on a non-discounted basis. This reserve calculation method has a proven track record superior to any other method, as well as being more transparent.”
PCI also expressed concern with the draft’s apparent adoption of an overly-severe final target level of 99.5% Value at Risk (VaR) over one year. “While the 2014 ICS Consultation Draft asked whether 99.5% VaR was appropriate for field testing purposes, we are not aware of any place where the IAIS has asked stakeholders whether this was the appropriate final target level,” continued Broadie. “In addition, the IAIS has made no case for selection of the 99.5% level as the ultimate target.”
PCI also asked the IAIS to expose the target level for comment by stakeholders before a final decision was made. “To the extent this capital standard is too high, it will impose significant additional costs for global insurers and the consumers they serve,” concluded Broadie.
PCI’s comments are attached.