GFIA Annual Report 2022-2023

CAPITAL

Capital work

From a solid foundation, work on a global capital standard continues

By Charlotte Clark, chair of the GFIA Capital Working Group

It has been a great pleasure chairing the GFIA Capital Working Group in this pivotal moment as we continue to work towards establishing a robust and efficient international capital standard.

All insurers, whether individual entities or groups, aim to maintain highly effective risk-management to ensure their safety and soundness and to protect their customers. The important role insurers have for individuals and businesses dictates that — both nationally and globally through the work of GFIA — we must all take due care to attain and maintain these standards.

As we reflect on all the work done this year, we must not forget the efforts in prior years that have set a solid foundation for the development by the International Association of Insurance Supervisors (IAIS) of the Insurance Capital Standard (ICS) (see also the IAIS opinion article here). It is this work that can allow, in due course, the Common Framework for the Supervision of Internationally Active Insurance Groups (IAIGs) to include a quantitative element in the form of the ICS.

Business as usual

The further development of capital standards internationally has been a prominent feature of our work throughout the year. Therefore, the June 2023 consultation on the ICS as a Prescribed Capital Requirement (PCR) — whilst an important milestone and involving a lot of work — was “business as usual” for myself and the Working Group. The Group has supported and acknowledged the IAIS’s work as the ICS has evolved. It has continued to act as a forum for sharing views and gaining understanding of the issues and concerns of GFIA members and for developing harmonised positions to support the further evolution of the standard.

In the GFIA response to the ICS consultation, the Working Group developed and shared general comments to be considered before the adoption and implementation of the ICS. Notably, the Group supports the main principle established by the IAIS when the project began, namely creating a globally accepted capital standard. Furthermore, the Group considers that the draft revisions to Insurance Core Principles 14 (Valuation) and 17 (Capital Adequacy) provide a sound basis for supervision of IAIGs globally — although the references to internal models were concerning. Significantly, the efforts of the Working Group have been recognised by the IAIS, and this is evident in the Candidate ICS, which clearly incorporated our feedback, for example by including internal models.

It is positive to see a high level of engagement from many jurisdictions that have actively come together to participate in the fourth consultation on the ICS.

The prominence of the ICS was again evident at the IAIS Global Seminar 2023 in Seattle. In the panel discussion, main agenda and networking events, the ICS was the buzzword of the conference and generated significant dialogue. The same held true at the IAIS Annual Conference and, as always, it was a pleasure to meet GFIA colleagues in-person to exchange thoughts.

“The Candidate ICS clearly incorporated our feedback, for example by including internal models.”

“We acknowledge the challenges with aligning and harmonising standards globally, particular when certain regimes are already well established.”

Global alignment — stronger together

While solvency regimes and frameworks in certain jurisdictions, most notably in the EU and the UK, are under review, the Working Group has diligently stayed abreast of developments.

We acknowledge the challenges with aligning and harmonising standards globally, particular when certain regimes are already well established. However, the importance of robust and efficient capital standards and the establishment of a common language for supervisors to discuss the solvency of IAIGs is a worthwhile undertaking that requires our attention and resources. This is a challenging but important task. We have come a very long way since the IAIS announced in 2013 its intention to develop the ICS and we must keep the momentum and effort going, as the goal is very much in sight.

The assessment continues

Following feedback from the GFIA Capital Working Group and other stakeholders, the IAIS published in March 2023 its finalised criteria that will be used to assess whether the Aggregation Method developed by the US provides comparable outcomes to the ICS. This is another important milestone, and we look forward to further information on how the assessment will be carried out by the IAIS.

A lot of work has been done so far but there remains significantly more to do as we look towards the planned adoption and implementation of the ICS as a PCR in 2024. We also look to the IAIS to communicate precise timelines for the implementation of the ICS and any transitional periods that may apply.

Charlotte Clark

Association of British Insurers

Charlotte Clark

Association of British Insurers

Print version

Awareness-raising campaigns

Insurers across Europe are involved in a broad range of awareness-raising campaigns. For instance, in Germany, risk-awareness campaigns are implemented jointly by state authorities, consumer protection organisations, the insurance industry, architects and other stakeholders. Their collaboration is built around a common goal: to raise awareness of the effects of climate change and natural hazards, of the benefits of loss prevention, and of best practices as regards natural catastrophe-resilient buildings. The high level of risk awareness in Germany is one of the reasons for the relatively low protection gap; indeed, the insurance penetration rate for natural perils such as storm or hail is more than 90%.
Most European insurance associations have initiatives to raise risk awareness, such as dedicated workshops, events and educational seminars, as well as frequent in-depth articles, themed newsletters, presentations and other publications.
Many French insurers have launched prevention campaigns and also support the campaigns of “Assurance Prévention”, an association founded by the French insurance association (France Assureurs). Assurance Prévention has produced numerous leaflets, infographics, quizzes, etc. to raise awareness of natural risks. Through its initiatives, it aims to develop a “culture of risk prevention” among students and teachers.

The Greek insurance association (HAIC) launched a digital awareness campaign — “Better to know than to think you know” — to provide consumers with useful information about private insurance and to set the record straight on some misperceptions. The campaign consists of six videos to educate the public about how private insurance works. Most of the videos emphasise the need for resilience in the face of natcat risks and the role of insurers in protecting private property. The videos are hosted on the interactive iknow-insurance.gr platform, which allows visitors to do a short quiz to test their knowledge of private insurance and then obtain additional information.
Insurance Sweden is currently working with its members on a common methodology for calculating carbon dioxide emissions during building repairs. The aim is to raise awareness of the impact on CO2 emissions of rebuilding after fire or water damage, and thus of the importance, from that perspective as well, of preventing such damages.
Insurance Sweden published a statistical report in October 2021 on how different municipalities and regions have been affected by damage caused by flooding, storm and fire.
Spotlighting the central role of municipalities in climate-change adaptation, Insurance Sweden ranks Swedish municipalities according to their adaptation work. The methodology is based on the European Commission’s Adaption Support Tool (2013). The ranking is released every other year, the June 2021 version is available here.
UNESPA, the Spanish insurance association, launched a dedicated website in October 2021 — “Naturalmente Protegidos” (Naturally protected) to explain how natcat insurance works in Spain. It focuses on 10 different risks (rain, flood, wind, drought, frost, hail, snow, earthquake, volcanic eruption and lightning) and details for each how insurance covers property, life, harvests and livestock. The website illustrates the success of the Spanish public-private natcat insurance model. It was jointly developed by private insurers (UNESPA), the Consorcio de Compensación de Seguros (CCS) government scheme and Agroseguro, Spain’s agricultural insurance system, and was launched within the framework of Estamos Seguros, UNESPA’s financial education campaign (running since 2016).
In collaboration with CEPYME, the Spanish confederation of SMEs, UNESPA launched in October 2020 “Prevenir para crecer” (Prevent to grow), a website with information on insurance for SMEs. The website highlights potential risks to which SMEs are exposed, including natcat-related risks, and provides advice on how to prevent them.
Insurance Ireland, the Irish insurance association, and a number of Irish insurers have launched consumer blogs and information repositories on their websites to share useful information with consumers about responsible and ESG investing.

Education

The European insurance industry works to increase financial literacy in relation to risk awareness, insurance protection and long-term savings:

The Croatian Insurance Bureau (HUO) launched a first educational project in 2009, “Financial literacy in the Republic of Croatia”, which was followed by a range of educational activities, often implemented jointly with independent insurers. One of these activities, “Safer Tomorrow”, was initiated in 2021, and aims to raise citizens’ awareness of the benefits of insurance. Within the framework of the project, HUO launched several videos and infographics, some of which specifically target young people.
The HUO organises a yearly competition for the best scientific paper, the best graduate thesis and the best undergraduate thesis in the field of insurance. HUO also publishes the “Croatian magazine for INSURANCE”, a scientific journal for professionals to advance good practice in the sector. Finally, some insurers in Croatia created a colouring book for children to promote financial literacy at a young age in a fun and simple way.
In Italy, the ANIA Academy, together with CeTIF (Research Centre on Technologies, Innovation and Finance of the Università Cattolica del Sacro Cuore), launched the second edition (2022) of the 2nd level master’s in insurance management to train professionals and enable them to respond to the challenges of the “new normal”.
ANIA is also collaborating with LUISS Business School to develop a major course in insurance management as part of its Executive Master in Financial Management.
Insurance Europe produces information for consumers as part of its “InsureWisely” financial education initiative. This includes one-pagers on different insurance topics, including how to limit the effects of natural catastrophes.
The French insurance association (France Assureurs) developed a series of educational booklets within the framework of EDUCFI (the French national strategy for economic, budgetary, and financial education), an initiative launched by the French Central Bank. These booklets help users to better understand how insurance works and what insurance products do and do not cover.
The Spanish insurance association (UNESPA) set up a financial education programme for schools, “El Riesgo y Yo” (“The Risk and I”). It involves 40 insurance undertakings and 164 volunteers and aims to give 2 500 teenage school students basic financial knowledge and insights into risk management.