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Insurance Core Principles
Subject Area Financial Regulation and Supervision /Insurance Supervision/General Supervision
Issuing Body International Association of Insurance Supervisors (IAIS) [more]
Date 01.10.2003
Status Revised October 2003
Language
Location: http://www.iaisweb.org/__temp/Insurance_core_principles_and_methodology.pdf
Synoptic Description
The Insurance Core Principles comprise essential principles that need to be in place for an insurance supervisory system to be effective. These principles set out the framework for insurance supervision, identify subject areas that should be addressed in legislation or regulation in each jurisdiction and provide a framework for the IAIS on which to develop more detailed international standards (revised October 2003).
Detailed Description
The principles identify key issues for the insurance supervisors as follows:
Organisation of an Insurance Supervisor: The insurance supervisor of a jurisdiction must be organised so that it is able to accomplish its primary task, i.e. to maintain effective, fair, safe and stable insurance markets for the benefit and protection of policyholders. It should at any time be able to carry out this task effectively in accordance with the Insurance Core Principles.
Licensing and changes in control: Companies wishing to underwrite insurance in the domestic insurance market should be licensed and review changes in the control of companies that are licensed in the jurisdiction.
Corporate governance and internal controls: It is desirable that standards be established in the jurisdiction, which deal with corporate governance. The supervisor should be able to review the internal controls and require the board of directors to provide suitable prudential oversight.
Prudential rules: Insurance companies should meet prudential standards established to limit or manage the amount of risk that they retain. Standards should be established in the areas of assets, liabilities, capital adequacy and solvency, derivatives and ‘‘off-balance-sheet'' items and reinsurance.
Market conduct: Insurance supervisors should ensure that insurers and intermediaries exercise the necessary knowledge, skills and integrity in dealing with their customers.
Monitoring and on sight inspection: Insurance supervisors should get the information they need to properly form an opinion on the financial strength of the operations of each insurance company in their jurisdiction.
Sanctions: Insurance supervisors must have the power to take remedial action where problems involving licensed companies are identified.
Cross-border business operations: The insurance supervisor should ensure that: no foreign insurance establishment escapes supervision; all insurance establishments of international insurance groups and international insurers are subject to effective supervision; the creation of a cross-border insurance establishment is subject to consultation between host and home supervisors; and foreign insurers providing insurance cover on a cross-border services basis are subject to effective supervision.
Co-ordination: In order to share relevant information with other insurance supervisors, adequate and effective communications should be developed and maintained.
Co-operation: In developing or implementing a regulatory framework, insurance supervisors should develop co-operation with any other supervisor or relevant body both in other jurisdictions and in other sectors of the industry (i.e., insurance, banking, or securities).
Confidentiality: All insurance supervisors should be subject to professional secrecy constraints in respect of information obtained in the course of their activities.