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Common Framework for the Supervision of Internationally Active Insurance Groups (ComFrame)

Last Updated 6/12/17

Issue: The regulation of insurance groups garnered considerable attention following the global financial crisis of 2008, with various regulatory agencies developing new guidelines and requirements for the supervision of financial holding companies. In the U.S., the Solvency Modernization Initiative (SMI), initiated in June 2008, led to substantive changes regarding how insurance groups will be monitored and regulated in the coming years, including amendments to the Insurance Holding Company System Regulatory Act (#440) and the Insurance Holding Company System Model Regulation (#450). Globally, however, the most significant development regarding group supervision is a major project initiated at the International Association of Insurance supervisors (IAIS) known colloquially as ComFrame (Common Framework for the Supervision of Internationally Active Insurance Groups).

Overview: ComFrame is a set of international supervisory requirements focusing on the effective group-wide supervision of internationally active insurance groups (IAIGs). An IAIG is a large, internationally active group that includes at least one sizeable insurance entity. ComFrame sets out a comprehensive range of quantitative requirements specific to IAIGs, and requirements for supervisors of IAIGs. ComFrame is built and expands upon the high level requirements and guidance currently set out in the IAIS Insurance Core Principles (ICPs) which generally apply on both a legal entity and group-wide level.

ComFrame was originally within a modular structure consisting of three modules, each with several elements containing Standards, Parameters and Guidelines.However, the IAIS recently approved a plan to restructure ComFrame and integrate it directly into the ICPs. According to the IAIS, “the ICPs and ComFrame are inextricably linked, with ComFrame designed to build and expand upon the high level requirements in the ICPs. ComFrame’s new structure will better reflect this while also helping to ensure that ComFrame and the ICPs are developed by themes in a parallel and complementary manner that avoids unintended duplication.”

The Development Phase of ComFrame began in 2010 and concluded at the end of 2013, with several ComFrame drafts released for public consultation during this period. ComFrame is currently being field tested to assess the value and practicality of the various requirements, so it can be modified as necessary prior to formal adoption. The IAIS is currently scheduled to formally adopt ComFrame in 2019, with its members to begin implementing ComFrame thereafter.

In addition, it was announced in October 2013 that the IAIS will develop a risk-sensitive insurance capital standard (ICS). An initial version is due to be developed by 2017. Full implementation is expected in 2019 after two years of testing and refinement with supervisors and global insurance groups. The ICS will be developed within ComFrame and apply to all IAIGs. It will ultimately become a core element of ComFrame. The IAIS hopes the ICS will provide a more comparable measure of capital across jurisdictions and allow host supervisors to have greater confidence in the group-wide supervisor’s decisions and analysis.

Status: State insurance regulators, working through the NAIC, released a position paper on ComFrame in April 2015 titled, “U.S. Insurance Regulators’ Views: IAIS Common Framework for the Supervision of Internationally Active Insurance Groups “ComFrame.” The purpose of the position paper is to articulate the views of U.S. state insurance regulators toward ComFrame and to identify the characteristics of ComFrame that are necessary for U.S. state insurance regulators to support its implementation in the national system of state-based insurance regulation. A position paper on the International Capital Proposals was also released in 2015.

The NAIC’s international involvement has been increasingly focused on strengthening the supervision of insurers that operate in multiple countries, or IAIGs. The ComFrame Development and Analysis (G) Working Group provides ongoing technical review as well as expedited strategic input on ComFrame. 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.