The International Association of Insurance Supervisors (IAIS) today published a draft Issues Paper on structural shifts in the life insurance sector for consultation.
The paper provides a comprehensive analysis of the structural shifts within the life insurance sector, with a particular focus on the increased allocation to alternative assets and the adoption of asset-intensive reinsurance agreements. It explores these emerging trends in greater detail, provides a framework for understanding macroprudential and financial stability implications and identifies potential areas for enhancement in the IAIS supervisory material.
The Issues Paper identifies four main areas of focus:
Alternative assets, outlining the trends and drivers, proposing a principled-based definition and evaluating key issues such as hidden leverage, liquidity risks, credit risk and credit ratings as well as regulatory capital-related issues;
Asset intensive reinsurance (AIR): describing the different transactions, outlining how jurisdictional differences in reserving, capital requirements and investment flexibility are driving the rise in AIR activity and summarising the supervisory risk assessments and corresponding supervisory responses to these risks;
Macroprudential and financial stability considerations: covering interconnectedness with broader market and financial stability risks;
And a review of IAIS supervisory material: identifying potential areas for enhancement in the IAIS supervisory material to effectively regulate and supervise the risks identified around these structural shifts.
The IAIS is seeking comments by the end of the day on 19th May 2025.