Non-traditional Non-insurance Activities and Products

Public Consultation

Consultation: comments due by 25 January 2016 midnight Basel time (CEST)

Background

In July 2013, the IAIS published a framework of policy measures for global, systemically important insurers (G-SIIs), which included a classification table of typical insurance products and activities.^[2] The notion of Non-traditional Non-insurance (NTNI) activities and products, and the classification of a list of insurance products, features and activities from across all jurisdictions, forms an integral aspect of those policy measures.

The IAIS acknowledges the importance of sufficient clarity and an improved understanding of the NTNI concept in light of the role it plays in the identification of G-SIIs and the determination of the Basic Capital Requirement (BCR) and Higher Loss Absorbency (HLA) Requirement.

This Consultation Document is intended to solicit feedback from stakeholders on the proposed analytical framework and the preliminary conclusions from the analysis, including how various insurance products and features from across all jurisdictions should be classified. This includes feedback on the selection and completeness of benefit types and liquidity features assessed, as well as the transmission channels through which vulnerabilities could amplify a shock and contribute to systemic risk.

This consultation focuses on features of insurance contracts that may be identified as “non-traditional.” There may be other products and activities that are undertaken by insurers and can be classified as non-insurance. These were envisioned under the original NTNI Principle 3, which captures activities creating “maturity or liquidity transformation, leverage or imperfect transfer of credit risk.” This consultation focuses on insurance product features, while noting that these other products and activities, would still constitute NTNI.

This consultation is the first step of a three-step process to clarify the NTNI concept and its consistent application across IAIS projects and across jurisdictions. The three steps are as follows:

• Step 1: Finalise the analytical framework proposed in this consultation, based on product features.
• Step 2: Assess and then classify the list of products and activities identified in the consultation against the framework of features, informed by the input provided by stakeholders.
• Step 3: Identify any gaps in or necessary modifications to the framework and existing principles, with input from stakeholders as appropriate.

These conclusions will be reviewed in future to capture improvements, developments in the insurance sector, changes in insurers, growth in the global insurance markets and any progress in methods and approaches for measuring systemic importance in the insurance sector.

[2] See Global Systemically Important Insurers: Policy Measures, 18 July 2013.

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