The International Association of Insurance Supervisors (IAIS) has proposed a methodology for identifying global systemically-important insurers (G-SIIs), also outlining possible prudential standards applicable to them.  Although the approach appears targeted at individual firms as the G-SII acronym states, the approach to identifying systemic risk for insurance companies is based principally on activities that IAIS cites as “non-traditional” insurance that presents the greatest systemic risk.  G-SIIs would be subject to higher capital standards, more stringent resolution planning, and, perhaps, even flat-out bans on non-traditional activities. As a result, the global framework – while still a work in progress – could result in a strategic redefinition of G-SIIs and lines of business targeted by the final global standards.  These global rules will also drive final U.S. systemic regulation for the insurance industry, although the U.S. may take action well before IAIS finalizes its assessment methodology and related prudential regulation for G-SIIs.

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