IAIS Introduces New Global Standards to Strengthen Insurance Regulation

December 8th, 2024

Kathmandu – The International Association of Insurance Supervisors (IAIS) has taken a monumental step in shaping the future of global insurance regulation. At its annual meeting held on December 5 in Cape Town, South Africa, attended by over 200 regulators, including representatives from Nepal, the IAIS passed crucial reforms aimed at strengthening financial stability and protecting policyholders worldwide.

The centerpiece of these decisions is the adoption of the Insurance Capital Standard (ICS), a risk-based framework that redefines capital adequacy requirements for insurance companies. IAIS Chairman Shigeru Arizumi described the decision as “historic for financial stablity” emphasizing its role in ensuring long-term financial resilience in the insurance sector.

The ICS will be implemented in phases between 2025 and 2027, with jurisdictions aligning their regulatory frameworks to meet the new global standard. This shift will impact insurers and reinsurers globally, including Nepal, where partial adoption of risk-based capital practices is already underway. While no immediate disruptions are anticipated, experts predict a tightening of profit margins for Nepali insurers as they adapt to the new requirements.

In addition to the ICS, the IAIS updated its Insurance Core Principles (ICPs) and the Common Framework (ComFrame) for supervising Internationally Active Insurance Groups (IAIGs). These updates address pressing issues such as climate-related risks, systemic risk mitigation, and valuation standards. The IAIS has committed to publishing further guidance on climate-related risks by 2025, reflecting the growing importance of environmental factors in financial regulation.

Nepal Insurance Authority Chairman Surya Prasad Silwal also participated in the discussions and the decisions are expected to impact Nepal’s insurance and reinsurance sectors. While the country has partially implemented risk-based capital frameworks, the new standards could result in reduced profit margins for local companies.

This year’s meeting marks a significant shift toward global regulatory alignment. By 2027, IAIS members will undergo jurisdictional assessments to ensure compliance with the ICS, aiming for consistent implementation across all regions.

Your Comment

Your email address will not be published. Required fields are marked *


*