The Guernsey Financial Services Commission (GFSC) has launched a discussion paper seeking the industry’s feedback on the evolution of the island’s global and European insurance capital standards and the future for Guernsey’s regulatory framework.
The paper considers the International Association of Insurance Supervisors (IAIS) International Capital Standards (ICS) project, which could create a global standard for insurance capital.
The IAIS is currently developing the ICSs, which could potentially create a comprehensive group-wide supervisory and regulatory framework for Internationally Active Insurance Groups (IAIGs), due to come into effect in early 2020.
The ICSs are designed to achieve a greater degree of comparability across jurisdictions and firms, through implementation of the Insurance Core Principles (ICPs).
The paper said: “In due course Guernsey will need to consider its approach to ICS in order to remain in line with international standards.”
“Aspects of the draft ICS resemble aspects of Solvency II, and therefore it is possible that achieving Solvency II equivalence would ease Guernsey’s path to ICS implementation. However, this would be true, albeit to a lesser extent, of Guernsey’s current risk based approach to solvency.”
The paper also discusses the possibility of Guernsey achieving Solvency II equivalence. The Solvency II directive, applicable to EU member states from January 2016, introduced a “harmonised prudential framework for insurance firms”, the paper said.
It suggested that the Guernsey International Insurance Association’s focus is on reinsurance equivalence only, if any application were to be made.
If there were to be any decision on Solvency II equivalence, insurance-linked securities and captives would be outside of the scope, assuming EU authorities agree bifurcation as they have done in other domiciles, such as Bermuda.
The paper explained that any preference of Guernsey’s needs to be considered in the context of the EU equivalence process. In addition, the European Insurance and Occupational Pensions Authority is obliged to consider the materiality of the appellant jurisdiction.
However, the paper suggested that, at this point, it seems likely that two relevant components of materiality are the comparable size of the Guernsey insurance sector and the extent to which it touches the EU.
Interested stakeholders are invited to respond to this paper no later than 20 October 2017. Feedback received will be reviewed by the commission and summarised in a follow-up feedback paper.
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