Evolving insurance regulation 2013

in Financial Services, 17.04.2013

The KPMG report “Evolving Insurance Regulation” analyzes the increasingly wide range of regulatory drivers for insurers and examines ways in which the industry can balance these new demands, while keeping an eye on creating positive value for enhanced performance.

2013 represents a new dawn for insurance regulations, particularly initiatives such as systemic risk, group-wide supervision and the International Association of Insurance Supervisors’ (IAIS) ComFrame proposal remain a key focus for many insurers and regulators. Increasingly, as more jurisdictions begin to implement the International Core Principles (ICPs), assessing how best to accommodate multi-jurisdictional compliance and reporting requirements is becoming a strategic challenge.

Key topics of the report

  • Latest international developments
    For insurers attempting to map the most likely changes to the shape and requirements of their respective regulators, initiatives such as the IAIS ICP’s and the EU’s Solvency II Directive remain a key focus.
  • Group supervision
    Increasing attention is being paid by supervisors to insurers’ assessment and management of group risk, both from the perspective of a top-down, group-level assessment of risk to the risk attached of a particular local entity.
  • Systemic risk
    The debate over systemic risks has shifted to insurers. The International Association of Insurance Supervisors (IAIS) intends to put forward measures for identifying globally systemic insurance institutions (G-SIIs) – businesses whose distress or disorderly failure would cause significant disruption to the global financial system or global economy.
  • The conduct agenda
    The global regulatory agenda is becoming increasingly focused on conduct of business issues, with many supervisors now beginning to target their approach to product design and customer value. In particular the product development process and governance, product features and product suitability for customer needs are key.
  • Enterprise risk management
    Insurers are increasingly turning to their risk management teams to optimize output and ensure value-enhancing performance. In the future, risk functions are going to have to justify the cost of risk management from both a commercial and compliance perspective.
  • Financial reporting: valuation and disclosure
    The lack of a common approach to accounting and financial reporting within the insurance sector renders many insurers’ financial statements unrepresentative and confusing – an issue of increasing significance as the industry globalizes.
  • Perspectives: Europe
    Over the next few years insurers have to report their own risk and solvency assessments, which require a combination of reporting on risk elements, capital requirements, and how governance arrangements are actually organized within the company. This could be a real step change to how a cohesive statement to the regulators is put together.

Need for action for Swiss insurers

Swiss insurers with activities abroad are touched by the evolving international regulation at the place of their business. Furthermore, FINMA is going to apply the international regulation on the Swiss market accordingly, since the collaboration of supervisors is evolving as well. Therefore, Swiss insurers must prepare themselves to cope with the new regulation and review their business processes carefully.

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