Key Attributes Assessment Methodology for the …

1 Key Attributes Assessment Methodology for the Insurance Sector Methodology for Assessing the Implementation of the Key Attributes of Effective Resolution Regimes for Financial Institutions in the Insurance Sector Consultative Document 21 December 2017 ii The Financial Stability Board (FSB) is established to coordinate at the international level the work of national financial authorities and international standard-setting bodies in order to develop and promote the implementation of effective regulatory, supervisory and other financial sector policies.

2 Its mandate is set out in the FSB Charter, which governs the policymaking and related activities of the FSB. These activities, including any decisions reached in their context, shall not be binding or give rise to any legal rights or obligations under the FSB s Articles of Association. Contacting the Financial Stability Board Sign up for e-mail alerts: Follow the FSB on Twitter: @FinStbBoard E-mail the FSB at: Copyright 2017 Financial Stability Board. Please refer to: iii The Financial Stability Board (FSB) is seeking comments on its consultative document: Key Attributes Assessment Methodology for the Insurance Sector.

3 Background Publication of the Key Attributes and its insurance specific Annex and guidance The FSB s Key Attributes of Effective Resolution Regimes for Financial Institutions ( Key Attributes or KAs) were adopted in October 2011 and endorsed as a new international standard for resolution regimes for financial institutions (including banks, insurers and financial market infrastructures (FMIs)) by the G20 Leaders at the Cannes Summit. Their implementation should enable authorities to resolve financial institutions in an orderly manner without taxpayer exposure to loss from solvency support, while maintaining continuity of their vital economic functions.

4 In October 2014, the FSB published an updated version of the Key Attributes which included a new Annex (II-Annex 2) on the resolution of insurers ( Insurance Annex ) that sets out sector-specific implementation guidance on how the Key Attributes should be interpreted when applied to resolution regimes for insurers. Building on the Key Attributes and Insurance Annex, the FSB published guidance (Developing Effective Resolution Strategies and Plans for Systemically Important Insurers, Resolution Planning Guidance ) in June 2016.

5 This guidance should assist authorities in meeting the resolution planning requirement under the Key Attributes and support Crisis Management Groups (CMGs) of global systemically important insurers (G-SIIs) in their resolution planning work. Development of the Key Attributes Assessment Methodology The Methodology is intended primarily for: (i) assessments performed by authorities of existing resolution regimes of their jurisdiction and of any reforms to those regimes that implement the Key Attributes ; (ii) peer reviews of resolution regimes conducted within the FSB framework for implementation monitoring by member jurisdictions; and (iii) International Monetary fund (IMF) and World Bank (WB) assessments of resolution regimes.

6 In August 2013, the FSB published a consultative document on Assessment Methodology for the Key Attributes of Effective Resolution Regimes for Financial Institutions as a single comprehensive document for all financial institutions (including banks, insurers and FMIs). The IMF also used this draft Methodology as a reference document in its review of the bank and insurance resolution regimes of one jurisdiction in the context of the Financial Sector Assessment Program. The responses to the public consultation and lessons from the use of the Methodology indicated the need for detailed sector-specific guidance on the application of the Key Attributes .

7 The FSB decided to adopt a modular approach and develop self-contained iv and free-standing methodologies with essential criteria (ECs)1 and explanatory notes (ENs)2 that are tailored to the particular features of each sector and therefore facilitates sector-specific assessments of the Key Attributes . The FSB published the Key Attributes Assessment Methodology for the Banking Sector in October 2016. Following that, the FSB developed the Key Attributes Assessment Methodology for the Insurance Sector, in consultation with the IMF, the WB and the International Association of Insurance Supervisors, which is now issued for consultation.

8 Questions for public consultation The FSB invites comments on the consultative document and the following specific questions: 1. Is the draft Methodology adequately tailored to the specific features of resolution regimes that are needed to deal with insurers or insurance groups that could be systemically significant or critical if they fail? Are there any elements that should be covered or elaborated in more detail in the Methodology ? 2. Should the draft Methodology provide any specific guidance on how to conduct an Assessment for financial conglomerates that combine insurance business with banking and/or other non-insurance financial business?

9 If so, what guidance should be provided? 3. Are the definitions of key terms (for example, creditors , insurance company , insurance contract , insurer , policyholder and policyholder protection scheme ) used in the draft Methodology appropriate for the insurance sector? (Section I) 4. Do the preconditions set out in Section V cover the relevant elements that are necessary for resolution regimes for insurers to operate effectively? 5. Do the ECs and ENs proposed in Section VI focus on relevant features of resolution regimes for insurers that need to be in place to comply with the Key Attributes , taking due account of the differences between the resolution of insurers and the resolution of other types of financial institutions?

10 Are any elements inappropriate? What, if any, additional features should be covered in ECs and ENs? 6. Do the ECs and ENs proposed in Section VI take due account of the different types of insurance business and insurance products (for example, life insurance, non-life insurance and reinsurance)? What, if any, additional features should be covered in ECs and ENs? 7. Do the ECs and ENs for KA 4 identify the features of the resolution regimes relating to set-off, netting, collateralisation and segregation that are relevant for insurance resolution?