Financial Sector Assessment Program Insurance

1
Financial Sector Assessment Program - Insurance

• Inter-American Development Bank.
• Washington, D.C.
• November 7, 2005.
• Nigel Davies.
• International Monetary Fund.
• ndavies_at_imf.org

2
FSAP - Insurance

• IMF / WB Mandate
• FSAP Assessment Methodology
• Insurance Results
• Issues Arising

3
FSAP InsuranceGeneral Background

• Interests
• Economic and Financial Stability
• Activities
• Financial Sector Assessment Program
• Technical Assistance
• Article IV Consultations
• Research

4
FSAP InsuranceWhat is assessed?

• Conditions for effective insurance supervision
• ICP 1 Conditions for effective insurance
  supervision
• The supervisory system
• ICP 2 Supervisory objectives
• ICP 3 Supervisory authority
• ICP 4 Supervisory process
• ICP 5 Supervisory cooperation and information
  sharing
• The supervised entity
• ICP 6 Licensing
• ICP 7 Suitability of persons
• ICP 8 Changes in control and portfolio transfers
• ICP 9 Corporate governance
• ICP 10 Internal control
• On-going supervision
• ICP 11 Market analysis
• ICP 12 Reporting to supervisors and off-site
  monitoring
• ICP 13 On-site inspection
• ICP 14 Preventive and corrective measures
• ICP 15 Enforcement or sanctions

• Prudential requirements
• ICP 18 Risk assessment and management
• ICP 19 Insurance activity
• ICP 20 Liabilities
• ICP 21 Investments
• ICP 22 Derivatives and similar commitments
• ICP 23 Capital adequacy and solvency
• Markets and consumers
• ICP 24 Intermediaries
• ICP 25 Consumer protection
• ICP 26 Information, disclosure transparency
  towards the market
• ICP 27 Fraud
• Anti-money laundering, combating the financing of
  terrorism
• ICP 28 Anti-money laundering, combating the
  financing of terrorism (AML/CFT)
• Non-Core Principle Related
• Technical Notes on relevant major issues.

5
FSAP InsuranceFSAP RESULTS SUMMARY

• Higher Degree of Compliance
• Confidentiality / Info. sharing
• Changes in Control
• Financial Reporting
• Capital Adequacy
• Liabilities

• Lower Degree of Compliance
• Corporate Governance /
• Internal Controls
• Assets / Investments
• Organization of Supervisor
• Market Conduct

6
FSAP Insurance FSAP RESULTS - Interpretation

• Change in Insurance Core Principles
• Trends in compliance over time
• Specificity and risk-sensitivity of CPs
• Technical Assistance Article IV are not
  systematically analyzed.

7
FSAP Insurance FSAP RESULTS Higher Degree of
Compliance

• Confidentiality
• (Impediments to supervisory co-operation?)
• Capital Adequacy / Liabilities
• (Variances in prudential strength?)
• (Procyclicality?)

8
FSAP Insurance FSAP RESULTS Lower Degree of
Compliance

• Upward trend
• Corporate Governance
• Assets / Investments
• No discernable upward trend
• Organization of Supervisor
• Market Conduct

9
FSAP Insurance ISSUES RAISED

• Direct Issues
• Diversity of national regulations
• Areas of supervisory co-operation
• Comparative prudential strength of institutions
• Indirect Issues
• Factors affecting market development
• Unitary regulatory authorities
• Principles-based vs. Rules-based regulation

10
FSAP Insurance CONCLUSIONS

• Issue
• Developmental gt
• Issues
• Prudential Strength gt
• Diverse Regulatory gt Regimes

• Conclusion
• Improve Market Conduct
• Introduce Quantitative Benchmarks
• Greater Co-operation, Convergence, less
• Confidentiality