The International Association of Insurance Supervisors (IAIS) has reached a historic milestone with the adoption of the Insurance Capital Standard (ICS) at its Annual General Meeting in December 2024¹, with the framework coming into effect from 1^st January 2025. This move establishes the first comprehensive global capital standard for insurance supervision, reinforcing financial stability and resilience in the insurance industry worldwide.

ICS: A Global Benchmark for Capital Adequacy

The ICS is designed to provide a globally consistent, risk-based measure of capital adequacy for internationally active insurance groups (IAIGs). It will serve as a prescribed capital requirement for IAIGs, ensuring that they maintain sufficient capital buffers to withstand financial stresses and protect policyholders. This initiative follows an extensive five-year monitoring period, incorporating input from volunteer participants and multiple public consultations.

Currently, 59 IAIGs² from 18 jurisdictions have been identified based on a number of criteria, highlighting the global scope and necessity of this standardised approach. By establishing a common language for solvency supervision, the ICS facilitates cross-border regulatory discussions and enhances financial stability.

To ensure transparency and effective implementation, the IAIS has released several key documents:

Level 1 & Level 2 Texts³: Outlines the specifics of the ICS framework. The Level 1 text sets out the overarching principles and concepts, while the Level 2 text provides detailed specifications.
ICS Calibration Document⁴: Provides details on risk charge calculations and aggregation methodologies.
ICS Economic Impact Assessment Report⁵: Evaluates potential effects of ICS adoption on insurance products, investment strategies, and business models.
Resolution of Public Comments Document⁶: Addresses feedback from the 2023 public consultation process.

Implementation Timeline

The IAIS has outlined a structured timeline for implementing and assessing the ICS across jurisdictions:

2025: Development of a detailed ICS assessment methodology.
2026: Co-ordination of a baseline self-assessment by IAIS members to track progress.
2027 onward: Initiation of detailed jurisdictional assessments to ensure compliance and effectiveness.

A key component of this process is the Aggregation Method (AM)⁷, developed by the United States, which will be used to produce comparable outcomes under ICS implementation. The IAIS will conduct qualitative and quantitative assessments to ensure all jurisdictions meet the ICS’s prudential standards.

Enhancements to ICPs and ComFrame

Alongside the ICS adoption, the IAIS has updated its Insurance Core Principles (ICPs) and Common Framework for the Supervision of IAIGs (ComFrame)⁸. These updates address emerging risks and supervisory challenges in areas such as:

Climate Risk: Adjustments have been made to investment and enterprise risk management guidelines to support a globally consistent approach.
Systemic Risk Mitigation: Enhancements to standards for liquidity risk, counterparty risk, contingency planning, and recovery and resolution.
Valuation and Capital Adequacy: Revisions to improve consistency and clarity in risk-based insurance supervision.

IAIS members are committed to implementing these updates from 2025 onwards, reinforcing the association’s dedication to a resilient insurance sector.

Conclusion

As a global standard-setting body, the IAIS plays a crucial role in ensuring fair, stable, and effective insurance markets. By adopting the ICS and updating its supervisory framework, the IAIS is taking significant steps toward safeguarding policyholders and strengthening the global financial landscape.

The adoption of the ICS is a testament to international collaboration in regulatory supervision and marks a significant step forward in ensuring a sound and stable insurance sector for years to come.

For more information, please see our previous article on the topic of ICS⁹ in which we discuss the formation of the standard and summarise the technical components outlined in the Level 1 and Level 2 texts.

How Finalyse can help

ICS reporting support:

Perform ICS impact assessment.
Support in submitting the ICS pack.
Support in responding to group-wide supervisor on any ICS-related queries.
Prepare internal training material on ICS calibration and comparison to Solvency II.

BAU implementation:

Design BAU process.
Implement ICS reporting into BAU processes and improve the quality of submissions.
Strategic support in understanding the ICS figures for your business including its impact on the long-term business strategy.

Please reach out to one of our experienced Finalyse consultants at insurance@finalyse.com who would be happy to help with all of your ICS or other regulatory needs.