Assessing compliance with ICPs ICP 17 Rogier Derksen 24 May 2016

Overview Background on the Exercise ICP 17 Developing Action Plans

How to Conduct and Assessment

Assessing against the objective The Three “P’s” Essential Components Questions Framework Do I have the power to achieve the objective of the standard? Is the power have the force of legislation? Is it fully and clearly elaborated? Policies and Procedures Do I have the policies and procedures that put the power in practice in support of the objective? Supervisory Practice Do I undertake the practices to achieve the objective?

Assessment Categories IAIS Assessment Categories How is the objective assessed? Do I have the legal framework? Do I have the policies and procedures to put the power into practice? Assessment Category Elaboration Observed All essential criteria observed Largely observed Only minor shortcomings exist Partly observed Despite progress, shortcomings sufficient to raise doubts Not observed No substantive progress Not applicable Not applicable due to structural/ legal/ institutional features or responsibility with other authorities

ICP 17

ICP 17: Capital Adequacy ICP 17 Solvency The supervisor establishes capital adequacy requirements for solvency purposes so that insurers can absorb significant unforeseen losses and to provide for degrees of supervisory intervention. Applies to insurance legal entities and any risks posed by non-insurance entities on insurance groups Total balance sheet approach Establishment of regulatory capital requirements control levels and triggers for intervention (SCR/PCR, MCR) Transparent determination of regulatory capital Roles of technical provisions and regulatory capital clarified Criteria for assessment of availability and quality of capital Standards and guidance on use of internal models Similarly for ICP 17 on capital adequacy The scope covers all risk within an insurance group The approach to capital adequacy is based on a total balance sheet starting point – often something that is discussed at length, but the principle at least is straightforward. All material assets and liabilities need to be measured on a consistent basis. The “ladder of intervention” is standardised to the extent that different supervisors can obtain a common view on levels of capital and triggers for intervention Disclosure is a key area and transparency in the determination of regulatory capital is also established The different roles of risk margins and technical provisions, when compared with regulatory capital are made more clear Criteria are established for the common assessment of availability and quality of capital And – standards and guidance are introduced on the use of internal models

Key questions for the exercise

Key Questions? What is ISD’s Observance level? How can ISD improve its observance? Long term Short term Any other observations?