The Rise of Global Standards and How Insurers Can Comply

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The Rise of Global Standards and How Insurers Can Comply

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Introduction The financial crisis of 2008 highlighted the need to strengthen the supervision and control of financial institutions designated as “Too Big to Fail”. At the November 2010 Summit meeting in Seoul, the G20 leaders endorsed a report by the Financial Stability Board (FSB) on reducing the moral hazard posed by Global Systemically Important Financial Institutions (G-SIFIs) by proactively identifying such firms and taking measures to lower the impact associated with their failure.1 As part of this global initiative, greater focus has been placed on potential Global Systemically Important Insurers (G-SIIs). A first list of nine firms, comprising insurance companies with home jurisdictions in the US, Europe and China, was published in July 2013 (with no adjustments made to the November 2014 release), including a description of the methodology used to qualify an insurer as a G-SII.2 This methodology was published along with a package of measures intended to be applied to the mentioned G-SIIs. The work of the International Association of Insurance Supervisors (IAIS),3 responsible for developing these G-SII measures, also includes additional requirements targeting international insurance groups. 2 In our view, the G-SII requirements are one key feature of a new global regulatory landscape intended to promote a common supervisory framework, thus helping to improve the effectiveness and consistency of insurance regulations. We see the advent of a global insurance regulatory architecture as a major challenge, both for supervisors and insurers. This document will explore the impacts on insurers and how they can respond to these developments based on current regulatory drafts.

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Do Insurers Pose Systemic Danger? The financial crisis helped confirm the overall resilience and strength of the insurance business model. It also demonstrated that the systemic relevance of insurance groups is correlated with activities outside the traditional insurance business field.4 As a result, the International Association of Insurance Supervisors (IAIS) has taken the initiative of defining the sources of systemic risk, due mainly to non-traditional insurance and non-insurance (NTNI) activities, or as a result of interconnectedness (the extent to which an activity and/ or product is linked to the financial markets. Other considerations include the institution’s size, global activity and its “substitutability” which is its capacity to continue providing services (in this case, insurance coverage) following the failure of an entity. NTNI activities can include leveraging, liquidity or maturity transformation, imperfect credit risk transfers such as “shadow banking” and credit guarantees or minimum financial guarantees. Such activities often involve products that are more complex than traditional insurance products, thus shifting financial market risk to insurers. Figure 1 below illustrates major traditional and non-traditional insurance activities as well as non-insurance activities. As mentioned, nine insurance groups were identified by the FSB as global systemically important insurers (G-SIIs) in July of 2013, based upon the IAIS’s definition of sources of systemic risk and NTNI activities. Beyond the G-SII designation, the IAIS developed an internationally coherent framework for the supervision of large, complex and global groups.5 This framework is not dependent on whether or not an insurance group is systemically important. Figure 1. Major traditional, non-traditional and non-insurance activities Traditional Activities Non-traditional Activities - Alternative risk transfer, including insurance-linked securities - Mortgage guarantee insurance - Financial guarantee insurance - Trade credit insurance Underwriting - Life insurance and variable annuities with additional guarantees - Finite reinsurance - Proprietary investment function (asset liability management - ALM) - Proprietary and derivatives trading (non-ALM) - Cascades of repos and securities lending - Hedging for ALM - Property management (as it relates to an investment portfolio) - Scope and scale of activities beyond insurance remit - Most life and non-life (re)insurance business lines Insurance Activities Investment and Funding - Funding through equity and debt issues, and securities lending Non-insurance Activities - Purely synthetic investment portfolios - Credit default swaps (CDS) and collateral debt obligations underwriting - Capital market business - Banking, investment banking and hedge fund activities - Third-party asset management - Industrial activities Source: “Insurance and Financial Stability,” International Association of Insurance Supervisors, November 2011. Access at: http://forinsurer.com/files/file00400.pdf 3

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The New Global Insurance Regulatory Landscape Figure 2 on the next page illustrates the relationships between the three types of requirements that apply to insurers depending on their activities, size and systemic importance: the IAIS Insurance Core Principles6 (ICPs), the Common Framework for the Supervision of Internationally Active Insurance Groups7 (ComFrame), and the Global Systemically Important Insurers package.8 • ComFrame is a set of international supervisory requirements focusing on the effective group-wide supervision of internationally active insurance groups (IAIGs). • The ICPs standards and guidance apply to all insurers and insurance groups, regardless of size, international activities or systemic importance. ICPs should apply to all insurers when capital requirements and other measures vary based on whether an institution is deemed an IAIG or G-SII. IAIGs would be subject to ComFrame and its • G-SII policy measures should apply only to designated G-SIIs, and should be appropriate for the risks that G-SIIs pose to the financial system. capital adequacy component, known as Insurance Capital Standards (ICS), and G-SIIs would have to cope with all quantitative requirements. These include Basic Capital Requirement (BCR), Higher Loss Absorbency (HLA) and ICS plus the G-SII Policy Measures’ specific qualitative requirements in addition to the ComFrame and ICP requirements. Note that the IAIS is responsible for setting out the criteria and process used by supervisory colleges to identify IAIGs and that the national regulators have discretion to determine whether an insurance group qualifies as an IAIG.9 New Qualitative Requirements The ICPs are the global standards for the supervision of the insurance sector. They are structured to allow a wide range of regulatory approaches and supervisory processes to suit both the different markets and the insurance entities and groups operating within these markets. ComFrame is built, and expands upon, the high-level requirements and guidance currently set out in the ICPs. This framework is not concerned with whether or not an insurance group is systemically important. The key criteria here, as seen in Figure 3, are whether the insurer has worldwide activities and, if so, what is the scope of those activities. As a result, the IAIS expects that approximately 50 IAIGs will be identified by supervisors.10 ComFrame would require from insurers a set of measures derived from Enterprise Risk Management (ERM) including:11 • Moving from a silo approach (with each business unit identifying and treating risks independently) to a portfolio approach (with business units cooperating within a common risk management framework); • Moving from a reactive risk management approach to a proactive approach, aligned with the company’s overall strategy through an explicit risk appetite statement and explicit risk limits; and • Extension of the board’s responsibilities. The IAIS framework for G-SIIs has three key policy areas:12 1. Enhanced Supervision – Enhanced supervision applies immediately to all G-SIIs. This involves specifically targeted regulation, greater supervisory resources and bolder use of existing supervisory tools than is the case with supervision of nonsystemically important insurers. 4 2. Effective Resolution – Effective resolution requirements aim to ensure that the resolution of G-SIIs could take place without severe systemic disruption and without increasing taxpayers’ exposure to loss. The resolution should be carried out in a way that does not slow down existing policyholder protection schemes. Building on the key attributes indicated by the FSB, the IAIS promotes four main requirements in effective resolution. 3. Higher Loss Absorbency (HLA) The IAIS was committed to develop “straightforward backstop capital requirements” to apply to all G-SIIs. The provision of additional capital is intended to help reduce the probability and impact on the global financial system in case of G-SII failures.

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Figure 2. Global regulatory framework affecting insurers, specifically G-SIIs and IAIGs Type of requirements All Insurers (Individual/Group) ICPs Qualitative ComFrame expands on ICPs ComFrame Capital Adequacy Component of ComFrame Capital Requirements for G-SIIs IAIGs ≈ 50 groups identified ICS Quantitative HLA BCR G-SIIs = 9 groups identified Effective Resolution Qualitative G-SII Policy Measures Enhanced Supervision G-SII Global Systemically Important Insurer IAIG Internationally Active Insurance Group BCR HLA Basic Capital Requirement Higher Loss Absorbency ICS ICPs Insurance Capital Standard Insurance Core Principles Source: “10th Annual Insurance Public Policy Summit, Confronting New Challenges in U.S. and International Regulation,” Institute of International Finance, March 12, 2014. A  ccess at: http://indstate.edu/business/NFI/events/10AIPPS/docs/Insurance%20Portilla%20IIF.pptx Figure 3. Criteria used by IAIS for classifying IAIGs International Activity Size (based on a rolling three-year average) - Premiums are written in no fewer than three jurisdictions, and - Percentage of gross premiums written outside the home jurisdiction is not less than 10% of the group’s total gross written premiums - Total assets of $50 billion US or more, or - Gross written premiums of $10 billion US or more Source: “Frequently Asked Questions for the IAIS Common Framework for the Supervision of Internationally Active Insurance Groups (ComFrame),” International Association of Insurance Supervisors, Updated December 17, 2014. Access at: http://iaisweb.org/index.cfm?event=openFile&nodeId=41664 The application matrix below summarizes the requirements by type of insurer Apply to…  BCR HLA ICS ComFrame ICPs G-SII IAIG All Other Insurers G-SII Global Systemically Important Insurer IAIG Internationally Active Insurance Group BCR HLA Basic Capital Requirement Higher Loss Absorbency ICS ICPs Insurance Capital Standard Insurance Core Principles Source: “10th Annual Insurance Public Policy Summit, Confronting New Challenges in U.S. and International Regulation,” Institute of International Finance, March 12, 2014.  Access at: http://indstate.edu/business/NFI/events/10AIPPS/docs/Insurance%20Portilla%20IIF.pptx 5

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Focus on G-SII Qualitative Requirements The items listed below represent only one part of the G-SII requirements, but, in our view, they would require more attention and a greater investment on the part of the affected institutions in the years to come. For a complete description of the requirements see: “Global Systemically Important Insurers: Policy Measures,” International Association of Insurance Supervisors, July 18, 2013. Access at: http://iaisweb. org/index.cfm?event=openFile&nodeId=34256. Systemic Risk Management Plan (SRMP) G-SIIs should be expected to start work with their group wide supervisor in developing a SRMP. The SRMP describes how the G-SII would manage, mitigate and reduce its systemic risk. The SRMP should include the actions the G-SII will take to either reduce systemic risks or to mitigate those risks. It should also describe the GSII’s enterprise risk management framework and the control framework that is in place to effectively mitigate these systemic risks. Effective separation of NTNI activities 3. Separation should not result in non-regulated financial entities. The group-wide supervisor may ask the G-SII to apply effective separation of NTNI activities to help reduce or mitigate systemic risks. The approach should be defined in the SRMP, and developed by the G-SII in collaboration with the group supervisors. The question of what constitutes effective separation is a critical supervisory policy issue. Whether or not NTNI activities are effectively separated could directly affect the resolvability of this question and may affect the calculation of higher loss absorption to be applied to the G-SII. As per the requirement, a G-SII should meet the following five regulatory standards, as applied by the group-wide supervisor, in order to be deemed effectively separated: 4. Intra-group transactions or commitments with the separated entity should be at arm’s length. 1. An effectively separated entity (subsidiary or affiliate) should be self-sufficient to the degree that it can operate without the support of the parent or affiliates. 2. The separated entity’s governance framework should ensure the operational independence of management (including risk management). 5. Reputational risks that could result in the parent or an affiliate providing financial support to the separated entity should be mitigated. The elaboration of Recovery and Resolution Plans (RRPs) There should be an ongoing process for recovery and resolution planning, covering, at a minimum, the domestically incorporated firms that could be systemically significant or critical if they fail. The firm’s senior management would be responsible for providing the necessary inputs to the resolution authorities for (i) the assessment of the recovery plans; and (ii) the preparation by the resolution authority of resolution plans. The goal of RRPs should be to maintain or restore the business in a sustainable way in the event of financial distress. New Quantitative Requirements We expect that the BCR (basic capital requirement, formerly known as backstop capital requirement) calculation methodology that follows may be modified in the future, as supervisors and IAIGs are presently in a testing and refinement phase (see page 12). The BCR is the foundation for the HLA calculation and could be ultimately replaced by the ICS. Figure 4 identifies the insurance groups covered, and the steps or order of the definitions used in developing the different capital standards requirements. 6 Figure 4. Chronology in developing capital standards requirements Macro-order in developing the standards BCR HLA G-SII 1 2 IAIG x x Source: Accenture analysis of publicly available documents ICS 3

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Basic Capital Requirement (BCR) BCR Ratio = Total Qualifying Capital Resources (for BCR) / Required Capital (for BCR) At the moment, a factor-based approach consisting of 15 risk measures is used to calculate BCR.13 This approach helps employ a simple structure that can be applied to all insurance groups while maintaining transparency into the 15 risk measures. The approach for calculating required capital should take into account the risks derived from these five major activity groupings: an insurer’s traditional life and non-life insurance (TL, TNL), non-traditional activities (NT), assets (A) and non-insurance (NI). An insurance group’s BCR amount can be identified using its BCR Ratio which is defined as: Figure 5. BCR required capital calculation methodology Where: 4 BCR Required Capital = α 4 ai TLi + i=1 TL TNL 4 bi TNLi + i=1 Traditional life Traditional non-life 3 ci NTi + i=1 NT A di Ai i=1 NIi + i=1 Non-traditional Asset Source: “Basic Capital Requirements for Global Systemically Important Insurers,” International Association of Insurance Supervisors, October 23, 2014. Access at: http://j7.agefi.fr/documents/liens/201410/24-YVSQBZCIUQXEXMN.pdf Qualifying capital resources are determined on a consolidated basis, with possible adjustments as required. Qualifying capital resources may be classified as either core or additional capital. Having two categories of qualifying capital resources would provide insurers with the option of defining a number of potential BCR Ratios such as:14 • BCR Core Ratio defined as: Core Capital/Required Capital • BCR Total Ratio defined as: Total Capital/Required Capital 8 - α (alpha) is the scalar (initially set at 100%) to determine the overall BCR level13 n - ai, bi, ci and di represent the factors applied to the exposures - TLi, TNLi, NTi, and Ai represent the exposures - NI reflects the charges provided by sectoral rules for non-insurance activities, for example, Basel Accord requirements, established by the BCBS

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Higher Loss Absorbency (HLA)15 Targeted HLA Capacity (step 1) – to the extent the G-SII has demonstrated effective separation of NTNI activities from traditional insurance activities, targeted HLA would be applied to the separate entities. Group-wide HLA Capacity (step 2) – whether or not NTNI activities have been separated, an overall assessment of group-wide HLA needed should be undertaken and the groupwide supervisor could determine whether the HLA capacity held at the dedicated NTNI entities is sufficient or needs to be further increased. Insurance Capital Standard (ICS) The following excerpt from a blog published by John Morley, Managing Director at Accenture, provides additional insight into the challenges surrounding ICS. The big ICS challenge will be developing a “normalised” balance sheet and capital model that makes sense across the nine G-SIIs and 40 plus IAIGs under multiple GAAPs and business profiles. This is the key technical challenge. Whilst an approach to the assets can (be) tackled the normalising of Insurance liabilities will be the true test. Interestingly the consultation has questions covering an internal model approach. However, given the timeframe, number and diversity of impacted companies it would be safe to conclude that this is not a feasible option, especially when we view the Solvency II experience. 10 Additionally, as the ICS will replace the BCR we can expect that the most likely outcome for the capital charge is a factor-based approach like the BCR. We could expect more granularity, some additional subsets of calculation and perhaps a stronger integration of diversification benefits. It will be interesting to see at what level the ICS capital charge will “bite” and what message that will give to the national regulator whose home solvency capital basis was not enough for their IAIG. Like the BCR it makes sense to leave calibration until the final stages. Source: “Another Insurance Capital Standards? Getting to grips with the ICS,” John Morley, Accenture, February 14, 2015. Access at: https:// www.linkedin.com/pulse/another-insurancecapitals-standard-getting-grips-ics-john-morley

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Figure 6. Overview of global capital standards requirements ICS International Capital Standard Serve as a comparable prudential floor, an early warning indicator, a minimum capital standard Internalize the costs on the financial system that a G-SII would have in case of a potential failure Contribute to the stability of the financial system and the protection of consumers Nature Basic (formerly “backstop”) capital requirement Additional level of capital in relation to a G-SII’s systemic activities (i.e. G-SIIs will be required to hold capital > BCR + HLA) A measure of capital adequacy and will constitute the minimum standard to be achieved Developer IAIS IAIS IAIS Sponsor FSB FSB IAIS Application Only to G-SIIs and at consolidated group-wide level Only to G-SIIs and at consolidated group-wide level All IAIGs (including G-SIIs) and at consolidated group-wide level Inter-linkage Links HLA Higher Loss Absorbency Objective General BCR Basic Capital Requirement The BCR is the foundation for HLA (and the BCR calibration may be modified depending on the HLA requirements) The HLA will build on the BCR (The BCR will The ICS is the foundation for HLA, serve as the comparable foundation for HLA. initially the BCR (ICS is the quantitative When the ICS is finalized, it will replace the part of the ComFrame initiative) BCR in its role as the foundation for HLA) Initial phase of annual confidential reporting to group-wide supervisor from 2015-18, public reporting to follow Transparency with regard to the final results Disclosure of the final results Scope of risks Main risks (assets, liabilities and offB/S exposures) on three components (insurance, banking, other non-insurance financial activities not currently subject to regulatory capital requirements, with a further fourth component covering other material non-financial activities) Drivers of G-SII assessment with capital uplift on NTNI activities (non-traditional, non-insurance) All material risks (including non-insurance risks and off-B/S activities). It is expected that a more comprehensive approach will be adopted for ICS development than for BCR Design Simple design and presentation (limits: no explicit recognition of Asset Liability Management (ALM), implicit diversification, reinsurance to be clarified) Pragmatic, practical design (appropriate balance between granularity and simplicity) Appropriate balance between risk sensitivity and simplicity (explicit treatment of diversification and ALM to be explored) Capital adequacy BCR can be covered by core and additional capital (max 50/50) HLA can be covered by highest quality capital Tiering approach for qualifying capital resources First steps Consultation (December 2013 – February 2014) Publication of principles (September 2014) Field Test (March 2014 – May 2014) HLA Consultation (December 2014 – Consultation (July 2014 – August 2014) February 2015) Publication of BCR design (October 2014) Endorsement by G20 (November 2014) Consultation (October 2013 – December 2013) Publication of principles (September 2014) Revised ComFrame draft (September 2014) ICS Consultation (December 2014 – February 2015) Next steps As of 2015, reviewing and refining of BCR along with first reporting Field Test (March 2015 – September 2015) Release of initial HLA consultation document (mid-2015) Field Test (April 2015 – June 2015) ComFrame Consultation (December 2015) Field Test (April 2016 – June 2016) Confidential reporting (2017-2018) Finalization HLA proposal to be endorsed by G20 in December of 2015 Finalization (December 2016) Consultation and Refinement (December 2017) IAIS formal adoption (Q4 2018) Implementation From 2015 to 2019 Technical details B/S valuation compatible with S2 and To be confirmed resembling S2 Solvency Capital Requirement Public/Private Milestones Articulation Balance sheet (B/S) valuation compatible with Solvency II with Solvency II (S2) (Market-Adjusted Valuation Approach, starting with IFRS or GAAP, and making adjustments to major B/S items) factor-based approach similar to S2 Minimum Capital Requirements From 2019 From 2019 Source: Accenture analysis of future global capital standards based on publicly available IAIS and FSB documents 11

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Effects on Insurers’ Agendas: Expected Implementation Timeline It was anticipated that the BCR would be applied to G-SIIs as of January 2015. When this happens, it is likely to influence the development of two other capital standards planned by the IAIS:17 In addition, G-SII measures on effective resolution (including recovery and resolution plans or RRPs) should have also been developed and agreed by crisis management groups (CMGs) as they were expected by the end of 2014. The IAIS is committed to develop the ICS by the end of 2016. Full implementation is scheduled to begin in 2019 after two years of testing and refinement with supervisors and IAIGs.18 • The HLA, the additional capital requirement for G-SIIs, and The timeline for implementing some of these measures are both ambitious and uncertain. For example, G-SII measures on enhanced supervision (including development of the Systemic Risk Management Plan) should have been implemented by now.16 Figure 7 below presents a timeline of when key measures could be expected to impact G-SIIs and IAIGs. • ICS for IAIGs Figure 7. High-level global capital standards roadmap G-SII Package ... 2013 2014 Publication of 1st G-SII list and methodology 2015 Basic Capital Requirement (BCR) + republished G-SII list Consultation Consultation BCR BCR CMG established + SRMP completed 2017 Higher Loss Absorbency Proposal (HLA) RRP BCR reporting HLA Application FT FT Global Insurance Capital Standard (ICS) for IAIGs Consultation ComFrame ... 2018 Consultation HLA FT IAIG Package 2016 Consultation ICS and Resolution Consultation ComFrame/ICS Full adoption of ComFrame/ICS Consultation ComFrame/ICS ICS FT ICS FT ICS Standard development by standard-setters Standard development milestone Implementation of required changes by insurance companies Standard implementation milestone CMG Crisis Management Group SRMP Systemic Risk Management Plan RRP Recovery and Resolution Plan FT G-SII IAIG Status as of May 2015 Source: Accenture analysis based on publicly available IAIS, IASB, FSB documents 12 Field Testing Global Systemically Important Insurer Internationally Active Insurance Group FT ICS

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The Specific Case of Reinsurance The decision to include some reinsurers within the list of G-SIIs has been postponed several times. Even if traditional insurance activities are not considered as either generating or amplifying systemic risk, the question whether reinsurers could create systemic risk through non-insurance activities such as writing collateralized debt securities or CDSs is still on the table. At the moment, the IAIS has postponed the decision, as further study and analysis is required.19 Effects on Insurers and How They Should Respond Insurers have taken different positions on new global standards; some are waiting for more information before taking a stand, while others have already publicly criticized the measures.20 They argue that these new measures should be aligned with other regimes (Solvency II in the EU) that have required hard, extensive work to stabilize. In addition, they say that these requirements may have a negative impact on the insurer’s business model, by requiring additional capital charges at a time when insurers are already facing difficult market conditions. In our view, even if the new capital regime is not yet stabilized, some key aspects of the policy measures should be highlighted—in particular those that complement the Solvency II regime in the EU—including the implementation of the enhanced supervision and effective resolution packages for G-SIIs. As a first step, insurers should think about their ability to identify their NTNI activities, assess their alignment with their risk strategy, and enhance their ERM capabilities. Insurers should not underestimate the amount of work needed to implement these measures, especially the steps related to identifying NTNI activities, implementing the key attributes and taking the corrective actions called for as part of the ERM framework. This, we believe, could put even more pressure on actuarial, finance and risk resources, and increase the need to foster cooperation between internal departments and the regulatory supervisor. Finally, the new capital measures may require additional capital adequacy field tests, scenario analysis and a comparison with other regimes (particularly the valuation question, maintaining market consistency versus Generally Accepted Accounting Principles and expected adjustments to regulations). Responding to These New Designations In response to the new G-SII designation, we have observed institutions adopt the following strategies: 1. Exiting strategy with institutions reshaping their company structure by carving out parts of their business, or challenging the designation in court. 2. Accommodation strategy with institutions accepting the higher capital requirements, policy measures and committing to comply with new designation. 3. ait and see strategy with W institutions awaiting the IAIS’s fine-tuning of the rules and how these will be applied. For financial institutions, the best course of action may be a combination of these strategies. We suggest they also consider field-testing and actively communicating their perspectives and thoughts on the G-SII designation with their local regulator. These new sets of requirements could, in our view, change the playing field and create new opportunities for the formation of subsidiaries, mergers and acquisitions, and for the development of new financial and asset liability management strategies, among the most-discussed areas. The sooner insurers review these different requirements, the more able they would be to anticipate potential higher capital charges and adjust their business models accordingly. 13

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Conclusion Numerous studies and analysis indicate that traditional insurance activities are not a major source of systemic risk.21 Such risks come mainly from NTNI activities or as a result of interconnectedness with other institutions. Our understanding of the underlying intentions of regulators and global leaders is: to discourage the development of NTNI activities and interconnectedness by applying higher capital charges; to minimize the impacts of failure by developing effective resolution plans; and to specifically oversee systemic institutions. However the G-SII initiative is only one part of a global framework with the overall goal of defining an insurance capital standard which could be applied to the entire global insurance industry. This new capital standard is designed to create a framework which would allow for more effective cross-jurisdictional regulatory supervision through the use of a comparable base across all jurisdictions. 14 We believe insurers should keep a close eye on the wide package of IAIS measures. The development of this comprehensive framework of reforms involves more than just capital; it is under way and may affect each insurer­ — whether a G-SII, an IAIG, a domestic systematically important insurer (D-SII), or one to be. The borders defining these categories are not yet clearly defined and could change based on current developments. Even an institution’s growing activity levels, expanding international footprint and foray into new businesses could make it eligible for a G-SII and, or IAIG designation. We also expect important increases in the level of insurance supervision across the globe, thus impacting institutions across regions.

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Notes 1. G-SIFIs are defined by the Financial Stability Board as “institutions of such size, market importance, and global interconnectedness that their distress or failure would cause significant dislocation in the global financial system and adverse economic consequences across a range of countries.” G-SIIs are one class of G-SIFIs. For more information see “Global Systemically Important Insurers: Policy Measures,” International Association of Insurance Supervisors, July 18, 2013. Access at: http://www. fsa.go.jp/inter/iai/20130719/04.pdf 2. “Global systemically important insurers (G-SIIs) and the policy measures that will apply to them,” Financial Stability Board, July 18, 2013. Access at: http://www.financialstabilityboard. org/wp-content/uploads/r_130718. pdf?page_moved=1. “2014 update of list of global systemically important insurers (G-SIIs),” Financial Stability Board, November 6, 2014. Access at: http://www.financialstabilityboard.org/ wp-content/uploads/r_141106a.pdf 3. The International Association of Insurance Supervisors (IAIS) is responsible for developing the assessment methodology while the Financial Stability Board FSB is responsible for designating the G-SIIs based upon the IAIS methodology. 4. “Global Systemically Important Insurers: Initial Assessment Methodology,” International Association of Insurance Supervisors, July 18, 2013. Access at: https://www.lloyds. com/~/media/files/the%20market/ operating%20at%20lloyds/regulation/ gpa/final_initial_assessment_ methodology_18_july_2013.pdf 5. “Frequently Asked Questions for the IAIS Common Framework for the Supervision of Internationally Active Insurance Groups (ComFrame),” International Association of Insurance Supervisors, Updated December 17, 2014. Access at: http://iaisweb.org/index. cfm?event=openFile&nodeId=41664 6. “Insurance Core Principles, Standards, Guidance and Assessment Methodology,” International Association of Insurance Supervisors, October 1, 2011, revised October 19, 2013. Access at: http://iaisweb.org/modules/icp/ assets/files/Insurance_Core_Principles__ Standards__Guidance_and_Assessment_ Methodology__October_2011__ revised_October_2013_.pdf.pdf 7. “Common Framework for the Supervision of Internationally Active Insurance Groups,” International Association of Insurance Supervisors, Revised DRAFT, September 2014. Access at: http://iaisweb.org/index. cfm?event=openFile&nodeId=34519 8. “10th Annual Insurance Public Policy Summit, Confronting New Challenges in U.S. and International Regulation,” Andrés Portilla, Institute of International Finance, March 12, 2014. Access at: http://indstate.edu/ business/NFI/events/10AIPPS/docs/ Insurance%20Portilla%20IIF.pptx 9. “Risk-based Global Insurance Capital Standard,” International Association of Insurance Supervisors, Public Consultation Document, December 17, 2014. Access at: https://actuarypl.s3.amazonaws.com/Risk-based_ Global_Insurance_Capital_Standard_ Consultation_Document.pdf1.pdf?AWSA ccessKeyId=AKIAIOW3KDG2CZARXGMA &Expires=1433383943&Signature=SUF X%2BYpGyQlkTGF3YjAgWwU2Vnw%3D 10. Ibid 11. “Common Framework for the Supervision of Internationally Active Insurance Groups,” International Association of Insurance Supervisors, Revised DRAFT, September 2014. Access at: http://iaisweb.org/index. cfm?event=openFile&nodeId=34519 12. “Global Systemically Important Insurers: Policy Measures,” International Association of Insurance Supervisors, July 18, 2013. Access at: http://iaisweb.org/index. cfm?event=openFile&nodeId=34256 13. “Basic Capital Requirements forn Global Systemically Important Insurers,” International Association of Insurance Supervisors, October 23, 2014. Access at: http://j7.agefi. fr/documents/liens/201410/24YVSQBZCIUQXEXMN.pdf 14. Ibid 15. “Global Systemically Important Insurers: Policy Measures,” International Association of Insurance Supervisors, July 18, 2013. Access at: http://iaisweb.org/index. cfm?event=openFile&nodeId=34256 16. “Frequently Asked Questions for IAIS Financial Stability and Macroprudential Policy and Surveillance (MPS) Activities,” International Association of Insurance Supervisors, Updated December 17, 2014. Access at: http://iaisweb.org/index. cfm?event=openFile&nodeId=41690 17. “Basic Capital Requirements for Global Systemically Important Insurers,” International Association of Insurance Supervisors, October 23, 2014. Access at: http://iaisweb.org/index. cfm?event=openFile&nodeId=34540 18. Ibid 19. “IAIS Releases Global Systemically Important Insurers Assessment Methodology and Policy Measures, Macroprudential Policy and Surveillance Framework,” International Association of Insurance Supervisors, newsletter. Access at: http:// newsletter.iaisweb.org/newsletterlink381?newsid=1087&call=1 20. “Aviva and Allianz CEOs criticise ‘regulatory tsunami’,” Insurance ERM, February 28, 2014. Access at: https://www.insuranceerm.com/newscomment/aviva-and-allianz-ceoscriticise-regulatory-tsunami.html 21. “Insurance and Financial Stability,” International Association of Insurance Supervisors, November 2011. Access at: http://forinsurer.com/files/file00400.pdf 15

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About the Authors About Accenture Eric Jeanne Eric is a Managing Director – Risk Management, based in Paris. He is specialized in Risk Management and Finance for the insurance industry, with a focus on Enterprise Risk Management framework, Solvency II and Risk and Finance architecture. Eric has been with Accenture for more than 15 years, leading large transformation projects at major insurance and reinsurance companies, and helping clients transform their Risk and Finance capabilities and processes. Accenture is a global management consulting, technology services and outsourcing company, with more than 323,000 people serving clients in more than 120 countries. Combining unparalleled experience, comprehensive capabilities across all industries and business functions, and extensive research on the world’s most successful companies, Accenture collaborates with clients to help them become high-performance businesses and governments. The company generated net revenues of US$30.0 billion for the fiscal year ended Aug. 31, 2014. Its home page is www.accenture.com. Isabelle Pelletier Isabelle is a Managing Director – Accenture Finance & Risk Services based in Paris. She is specialized in Risk Management and Finance for the insurance industry, with a focus on Solvency II and Risk and Finance processes. Isabelle has been with Accenture for more than 10 years, leading large Finance transformation programs for international insurance groups, helping clients transform their risk capabilities and finance processes. Fabien Oulmont Fabien is a Senior Manager – Finance & Risk Services, based in Paris. Specialized in Finance and Risk matters for the insurance industry, he works with clients to transform their processes, methods, tools and organization to drive value. With a focus on major regulatory agendas including Solvency II, he brings his cross-functional and technical skills to help insurers build, operationalize and streamline their end-to-end financial and prudential information capabilities. Copyright © 2015 Accenture All rights reserved. Accenture, its logo, and High Performance Delivered are trademarks of Accenture. Stay Connected Accenture Finance & Risk Services www.accenture.com/microsites/ financeandrisk/Pages/index.aspx Connect With Us www.linkedin.com/ groups?gid=3753715 Join Us www.facebook.com/accenturestrategy www.facebook.com/accenture Follow Us www.twitter.com/accenture Watch Us www.youtube.com/accenture Disclaimer This document is intended for general informational purposes only and does not take into account the reader’s specific circumstances, and may not reflect the most current developments. Accenture disclaims, to the fullest extent permitted by applicable law, any and all liability for the accuracy and completeness of the information in this document and for any acts or omissions made based on such information. Accenture does not provide legal, regulatory, audit, or tax advice. Readers are responsible for obtaining such advice from their own legal counsel or other licensed professionals. 15-1118

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