ICP 25 Supervisory Cooperation and Coordination

The supervisor cooperates and coordinates with involved supervisors and relevant authorities to ensure effective supervision of insurers operating on a cross-border basis.

25.1

The supervisor discusses and agrees with the involved supervisors which of them is the group-wide supervisor for cross-border insurance groups operating in its jurisdiction. 


 


25.2
As a group-wide supervisor, the supervisor: 
  • understands the structure and operations of the insurance group; and
  • leads group-wide supervision, taking into account assessments made by the other involved supervisors.


25.3
As an other involved supervisor, the supervisor understands:
  • the structure and operations of the group insofar as it concerns the insurance legal entities in its jurisdiction; and
  • the way that operations of insurance legal entities of the group in its jurisdiction may affect the rest of the group


25.4
The group-wide supervisor discusses and agrees with other involved supervisors to establish suitable coordination arrangements for crossborder insurance groups operating in its jurisdiction. 


25.5
The group-wide supervisor sets out the coordination arrangements in a written coordination agreement and puts such arrangements in place.

25.5.1    

The scope of coordination arrangements will vary and should reflect the circumstances of the particular insurance group and involved supervisors. 

25.5.2    
A written coordination agreement should cover activities including:
  • information flows between involved supervisors;
  • communication with the head of the group;
  • convening periodic meetings of involved supervisors; 
  • the conduct of a comprehensive assessment of the group, including the objectives and process used for such an assessment; and
  • supervisory cooperation during a crisis.

25.6
The supervisor discusses and agrees with involved supervisors whether to establish a supervisory college for cross-border insurance groups operating in its jurisdiction, and if so, how to structure and operate the supervisory college.


Establishing a supervisory college


25.6.1    
The group-wide supervisor, in cooperation and coordination with other involved supervisors, should consider establishing a supervisory college where, for instance:
  • the nature, scale and complexity of the cross-border activities or intra-group transactions are significant and associated risks are high;
  • group activities or their cessation could have an impact on the overall stability of the insurance markets in which the insurer operates; and
  • the insurance group has significant market share in more than one jurisdiction (see Application Paper on Supervisory Colleges).


Structure and membership of a supervisory college


25.6.2    

The group-wide supervisor, in cooperation and coordination with the involved supervisors, should carefully consider the structure of the supervisory college (for example, inclusive, tiered, or regional).

25.6.3    

A supervisory college is typically comprised of representatives of each of the supervisors responsible for the day-to-day supervision of the insurance legal entities, including material or relevant branches, which are part of the group and, as appropriate, any supervisors of other material non-insurance entities.

25.6.4    
Clear criteria should be established for defining the basis of membership in the supervisory college. Issues which should be considered in establishing these criteria include:
  • the relative size and materiality of the insurance legal entity relative to the insurance group as a whole;
  • the relative size or materiality of the insurance legal entity relative to its local market;
  • the level of risk in a particular insurance legal entity.

25.6.5    

The structure of and membership in the supervisory college should be reviewed on a regular basis to reflect changing circumstances in the insurance group.


Coordination agreement for a supervisory college


25.6.6    

The purpose of a supervisory college coordination agreement is to establish a framework for the operations of a supervisory college. The agreement is not legally binding and does not create enforceable obligations from one supervisor to another. However, jurisdictions may be subject to an obligation to establish such an agreement.

25.6.7    
While recognising the need to allow for flexibility in the operation of a supervisory college, matters covered by the coordination agreement generally should include:
  • membership of the supervisory college – including the approach to participation of members in the college;
  • the process for appointing a supervisor to chair the college (typically, but not necessarily, the group-wide supervisor);
  • roles and functions of the supervisory college and of the members of the supervisory college, including expectations of the chair;
  • frequency and locations of meetings (meetings should take place by telephone conference call or other means where an in-person meeting is not practical); and
  • scope of the activities of the supervisory college, including ongoing information exchange.

25.6.8    

Members of a supervisory college who are not signatories to the IAIS MMoU should enter into a similar long-term agreement covering information exchange and confidentiality, which could be included in the college coordination agreement.


Functions and activities of a supervisory college


25.6.9    

The group-wide supervisor, in cooperation and coordination with the other involved supervisors, should establish the appropriate ongoing functions of the supervisory college and clearly allocate those functions among the involved supervisors to avoid unnecessary duplication of supervisory tasks and to ensure no gaps exist in the supervision of the group.

25.6.10    
In establishing the functions of a supervisory college, the key activities which should be considered include:
  • providing access for involved supervisors to information and knowledge about the group and the environment in which it operates through information sharing;
  • assessing group-wide risk exposures, financial position and regulatory capital adequacy and the group-wide corporate governance framework, including risk management, internal control and intra-group relationships such as intra-group transactions and exposures;
  • understanding the material operations, solvency and liquidity needs of the material legal entities within the group;
  • coordinating supervisory activities such as joint off-site monitoring or on-site inspections or review of one or more entities within the group or of a particular aspect of the group’s functions such as internal audit, actuarial, risk management or compliance;
  • coordinating appropriate actions to ensure that the group and relevant entities within the group mitigate identified risks;
  • forming special focus teams to evaluate areas of particular concern or importance to the involved supervisors, or to bring together the requisite expertise to examine an aspect of the group’s operations;
  • providing a forum for involved supervisors to interact with the insurer’s group-wide Senior Management in order to, for example, inform Senior Management of an identified issue at an insurance legal entity that affects the whole insurance group; and
  • regularly assessing the effectiveness of the supervisory college in fulfilling its agreed role and functions. The assessment should be organised by the group-wide supervisor and take into account input from the other involved supervisors and, as appropriate, legal entities.

25.6.11    

Aside from group-wide issues, supervisory colleges may also focus on issues specific to insurance legal entities within the insurance group.

​CF 25.6.a     
The group-wide supervisor establishes a supervisory college for the IAIG, which meets at least annually.

CF 25.6.a.1    
If a supervisory college does not already exist, one should be formed and its first meeting should take place in a timely manner after the identification of the IAIG.

​CF 25.6.a.2     
Priorities for the initial supervisory college meeting should include, at least:
  • confirming the group-wide supervisor and the structure of the supervisory college;
  • describing the scope of group-wide supervision including, where applicable, an explanation from the group-wide supervisor of its decision to exclude an entity from the scope of group supervision; and
  • discussing proposed coordination agreements.

​CF 25.6.a.3     
When an in-person meeting is not practicable, the meeting should take place by teleconference or other means.

​CF 25.6.a.4     
The group-wide supervisor should ensure that the IAIG’s supervisory college discusses the most relevant elements of the group-wide supervisory process and the supervisory plan. The agenda set by the group-wide supervisor should provide for discussion of at least the IAIG’s:
  • group-wide corporate governance framework;
  • enterprise risk management;
  • main risks and intra-group transactions;
  • financial position; and
  • regulatory capital adequacy and compliance with supervisory requirements.

​CF 25.6.a.5    
When deciding on the topics to be covered in the IAIG’s supervisory college meetings, the group-wide supervisor should cooperate and coordinate with involved supervisors to ensure that matters pertinent at a legal entity level are appropriately raised.

​CF 25.6.b     
The members of the IAIG’s supervisory college communicate and exchange information on an ongoing basis.

​CF 25.6.c    
The members of the IAIG’s supervisory college discuss and assess a summary of the reference ICS prepared by the group-wide supervisor, as well as a summary of any additional reporting related to the ICS that has been reported at the option of the group-wide supervisor.

​CF 25.6.c.1    
The assessment of the reference ICS and, if applicable, any additional reporting should include:
  • a comparison with existing group capital standards or calculations that are in development;
  • the extent to which material risks of the IAIG are captured;
  • the appropriateness and practicality of the calculations required; and
  • any difficulties in implementing the measure by the IAIG.

​CF 25.6.c.2    
 The purpose of the supervisory college discussing and assessing the summary of the reference ICS, and of any additional reporting, is to help refine the ICS.


Supervisory cooperation in planning for crisis management


25.7

The group-wide supervisor coordinates crisis management preparations with other involved supervisors and relevant authorities.


Supervisory cooperation during a crisis


25.8
The supervisor:
  • Informs the involved supervisors as soon as it becomes aware of a crisis;
  • cooperates and coordinates with the involved supervisors and relevant authorities to analyse and assess the crisis situation and its implications to reach a common understanding of the situation; and
  • identifies coordinated, timely and effective solutions to a crisis situation.


25.9

The group-wide supervisor coordinates with other involved supervisors and relevant authorities on public communication and communication with the insurance group during the crisis.

 


25.9.1    
The group-wide supervisor and other involved supervisors, where practicable, share their plans for public communication among themselves and with other authorities to ensure that communication is handled in a coordinated and timely way.

25.9.2    
The group-wide supervisor considers when, and to what extent, to communicate with the insurance group and the insurance legal entities that are part of the group, through their respective insurance legal entity supervisors.