Insurance markets have become increasingly global and interconnected and this trend is likely to continue. In response to the increasing globalization in the insurance sector combined with the key lessons learnt from the financial crisis, the International Association of Insurance Supervisors (IAIS) began developing a Common Framework for the Supervision of Internationally Active Insurance Groups (ComFrame) in July 2010. The IAIS is the international standard-setting body for the prudential supervision of the insurance industry.
ComFrame is a major project of the IAIS. While the ultimate role of ComFrame remains under discussion and development, the intent is given by its name—a common framework—one that lays out how supervisors around the globe can work together to supervise internationally active insurance groups (IAIGs) and close regulatory gaps. IAIGs are the largest, most complex insurance entities.
ComFrame has three main objectives which include: 1) developing methods of operating group-wide supervision of IAIGs; 2) establishing a comprehensive framework for supervisors to address group-wide activities and risks, and 3) fostering global convergence. ComFrame is neither intended to be a forum to create prescriptive ways to promote a particular means for solvency standards, nor to create additional layers of regulation. ComFrame is expected to evolve over time. It will be developed over a three-year period with the Development Phase completed by June 30, 2013. The IAIS will issue a comprehensive report detailing the end of the Development Phase, followed by a field testing phase (impact assessments of both qualitative and quantitative requirements for IAIGs).
In July 2011, the IAIS issued its first exposure draft of the Concept Paper on ComFrame. The Concept Paper composed of five primary work streams called “Modules,” with each Module further broken down into elements prioritized for purposes of development and exposure. The modules were: (1) Scope of Application; (2) structure and business from a risk management perspective; (3) Qualitative and Quantitative Requirements; (4) Supervisory process; and (5) Jurisdictional Matters.
Since the Concept Paper was released, there has been much progress made on the development of ComFrame. In March 2012, a new structure for ComFrame was proposed and subsequently approved by the IAIS Technical Committee. The new structure consists of four Modules (replacing the five Modules of the previous structure): (1) The Scope of ComFrame which includes the criteria and process for the identification of IAIGs by supervisors, the breadth of supervision of IAIGs (which legal entities are included) and the identification of the group-wide supervisor; (2) The IAIG contains the requirements that an IAIG will need to meet; (3) The Supervisors covers the process of supervision, highlighting the role of the group-wide supervisor and other relevant supervisors’ responsibilities within the process; and (4) Implementation of ComFrame sets out the jurisdictional requirements to implement ComFrame.
On July 2, 2012 the IAIS released a working draft of the ComFrame (“the 2012 ComFrame Draft”) for a two month public comment period. The 2012 ComFrame Draft marked the completion of the second step in its three-year Development Phase. The public comment period ran until August 31, 2012 and was intended to elicit comprehensive comments that will help shape the last year of the Development Phase of ComFrame.
The NAIC’s international involvement has been increasingly focused on strengthening the supervision of insurers that operate in multiple countries, or IAIGs. A key focus for the Solvency Modernization Initiative (SMI) project, a critical self-examination of the U.S. insurance solvency system, has been enhancing group supervision. In addition, the NAIC's International Insurance Relations (G) Committee supports the work of the IAIS by participating in Executive, Technical and other relevant Committee meetings, and by drafting and commenting on papers to represent the views of U.S. insurance regulators.