Industry representatives have claimed that the International Association of Insurance Supervisors (IAIS) has dropped plans to deliver a fully-fledged capital standard for insurance companies by the end of 2016.
The global standard setter will continue with its work on the insurance capital standard (ICS) for large insurers with businesses across borders, but a more incremental approach has now been adopted.
This comes as an agreement between the US and the EU on the methodology used for the ICS is looking increasingly hard to reach (see IERM, 19 February).
"The IAIS recently announced that it will take a staged or incremental approach to development of the ICS over several years with the ultimate goal of global convergence around one standard in the longer term," Robert Falzon, chief investment officer at Prudential Financial, told US senators.
"This signals a longer, rational and thoughtful process to development of the ICS than originally identified," he added during a high-profile hearing in Congress on 29 April.
Falzon praised the efforts of Federal Reserve and state regulators for devising a common US position on the issue, before adding that the IAIS should allow enough time to incorporate national input.
"The ICS would clearly benefit from the work of the Federal Reserve Board and the insurance industry supports appropriate adjustments to the IAIS timeline for the ICS to accomplish these objectives," Falzon said.
"Importantly, the IAIS has slowed its overly aggressive timeline for development of the ICS, which can only be implemented through a state or federal rulemaking process."
In his statement, Falzon also criticised the lack of transparency in the designation of insurers as systemically important financial institutions (non-bank Sifis) and called for a revamp of voting procedures at the Financial Stability Oversight Council.
As the rules stand, a supermajority is needed to approve a proposal to designate an insurer as systemically important. Falzon argued that in the case of firms engaged primarily in the business of insurance, the views of the council member with insurance expertise must be given special weight.
The IAIS could not be reached for comment.
