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DIRECTORATE GENERAL FOR INTERNAL POLICIESPOLICY DEPARTMENT A: ECONOMIC AND SCIENTIFIC POLICY

The European Union's Role inInternational Economic Fora

Paper 8: The IAIS

STUDY

IP/A/ECON/2014-15 August 2015

PE 542.197 EN

Abstract

This paper forms part of a series of nine studies on the role of the EuropeanUnion in international economic fora and provides factual backgroundinformation about the International Association of Insurance Supervisors (IAIS),the Union’s role and representation in IAIS, IAIS’ accountability as well as itscoordination and impact. A key conclusion is that the Union is well represented.As a result of both, commitment and investment, the European issues are wellcaptured. Key concepts of the EU-originated Solvency II framework found theirway worldwide and into IAIS standards and guidelines. A similar outcome in thearea of International Capital Standards for insurance undertakings must becautiously crafted. IAIS – and its European Members - stand at a crossroad inthis regard. Therefore, these developments should be carefully monitored.

This document was requested by the European Parliament's Committee on Economic andMonetary Affairs. It is part of a series of nine papers which cover from the same scientificangle: G20, FSB, IMF, OECD, BCBS/Basel, IAIS, IOSCO, IASB, and IOPS.

AUTHOR

Lieve LOWET, partner, ICODA European AffairsAssistance with analysis:Alexander HAMELS, research and policy analyst, ICODA European Affairs

RESPONSIBLE ADMINISTRATORS

Ivo VAN ESDoris KOLASSAStephanie HONNEFELDER

EDITORIAL ASSISTANT

Mirari URIARTE

LINGUISTIC VERSIONS

Original: EN

ABOUT THE EDITOR

Policy Department Economic and Scientific PolicyEuropean ParliamentB-1047 Brussels

Policy departments provide in-house and external expertise to support European Parliamentcommittees and other parliamentary bodies in shaping legislation and exercising democraticscrutiny over EU internal policies.

To contact the Policy Department or to subscribe to its newsletter please write to:[email protected]

Manuscript completed in March 2015© European Union, 2015

This document is available on the Internet at:http://www.europarl.europa.eu/studies

DISCLAIMER

The opinions expressed in this document are the sole responsibility of the author and donot necessarily represent the official position of the European Parliament.

Reproduction and translation for non-commercial purposes are authorised, provided thesource is acknowledged and the publisher is given prior notice and sent a copy.

The European Union's Role in International Economic Fora - Paper 8: The IAIS

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CONTENTSLIST OF ABBREVIATIONS 5

LIST OF BOXES 7

LIST OF FIGURES 7

LIST OF MAPS 7

LIST OF TABLES 7

EXECUTIVE SUMMARY 8

1. ORGANISATION 9

1.1. Legal status 10

1.2. Mission and objectives 11

1.3. Governance structure 11

1.3.1. Members 111.3.2. Internal bodies 131.3.3. Stakeholder Involvement 211.3.4. Accountability of IAIS 241.3.5. Financing of activities 25

1.4. Current membership of the organisation 26

1.4.1. Participating entities and membership of the EU Member States 261.4.2. Participating entities and membership of the EU bodies (EIOPA,Commission) 26

1.5. The EU Membership in internal bodies 27

1.5.1. Executive Committee 271.5.2. Committees 281.5.3. Working Groups (WGs) and Task Forces (TFs) 291.5.4. Mandate 291.5.5. Type and description of activities 291.5.6. Process of development of material 32

1.6. Other relevant features and observations: the impact of the IAIS work on theshaping of EU law 33

1.6.1. How soft is soft law? 331.6.2. The IAIS By-Laws 331.6.3. Self-Assessment and Peer Review (SAPR) 341.6.4. Integration of IAIS ICPs as part of FSAP Reviews 36

2. ACCOUNTABILITY OF IAIS AND COORDINATION; LEVEL, IMPACT ANDACCOUNTABILITY OF EU PARTICIPATION 39

2.1. Legal basis of membership of EU participants in IAIS 39

2.1.1. Commission 392.1.2. EIOPA 40

2.2. Determination of positions of EU participants 41

Policy Department A: Economic and Scientific Policy

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2.2.1. EIOPA 412.2.2. The Commission 422.2.3. Member States 43

2.3. Accountability and transparency 43

2.3.1. EIOPA 432.3.2. The Commission 45

2.4. Conflicts of interest 46

2.5. Strengths, Weaknesses, Opportunities and Threats 46

2.6. Analysis of the possible linkages with Global Economic Governance 49

2.6.1. The link of IAIS with the FSB 492.6.2. Link with the IMF 522.6.3. Leeway for the legislator? 53

2.7. Qualitative evaluation of the influence the EU has on shaping internationalstandards 55

3. EVALUATION OF CONFORMITY WITH ILA ACCOUNTABILITYRECOMMENDED RULES AND PRACTICES 57

REFERENCES 58

ANNEX I: List of Interviews / Survey 64

ANNEX II: IAIS Members 65

ANNEX III: Composition/Members of the IAIS Executive Committee 69

ANNEX IV: Financial Statements analysis 70

ANNEX V: IAIS Fee Structure 2011-2015 (by category in CHF) 71

ANNEX VI: IAIS Annual Member Fee 2015 72

ANNEX VII: KPMG Overview of FSAP Results 75

ANNEX VIII: International Law Association (ILA) - AccountabilityFramework 76

ANNEX IX: Participation of EIOPA's chair in IAIS meetings(2012 - 2014) 83


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LIST OF ABBREVIATIONS

ACPR Autorité de Contrôle Prudentiel et de Résolution (French Prudential Controland Resolution Authority)

AFM Autoriteit Financiële Markten (Dutch Financial Markets Authority)

BaFin Bundesanstalt für Finanzdienstleistungsaufsicht (German Federal FinancialSupervisory Authority)

BCBS Basel Committee on Banking Supervision

BCR Basic Capital Requirements

BIS Bank of International Settlements

CEET Central and Eastern Europe and Trans Caucasia

CIMA Conférence Interafricaine des Marchés d’Assurances

ComFrame Common framework (for the supervision of IAIGs)

EIOPA European Insurance and Occupational Pensions Authority

EBA European Banking Authority

ECB European Central Bank

ECJ European Court of Justice

EEGEFC

European Economic Governance

Economic and Financial Committee of the Council

ESA European Supervisory Authority

ESMA European Securities and Markets Authority

ExCo IAIS Executive Committee

FIO Federal Insurance Office (US)

FMA Österreichische Finanzmarktaufsicht (Austrian Financial Market Authority)

FSAP Financial Sector Assessment Program

FSB Financial Stability Board

FSDA Financial System Development Assessment (World Bank)

FSSA Financial System Stability Assessment (IMF)

G20 Group of Twenty

G-SII Global Systemically Important Insurers

GEG Global Economic Governance

HLA Higher Loss Absorbency


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IAIG Internationally Active Insurance Group

IAIS International Association of Insurance Supervisors

IASB International Accounting Standards Board

ICPs Insurance Core Principles

ICS International Capital Standards

IFRS International Financial Reporting Standards

ILA International Law Association

ILA RRPs ILA Recommended Rules and Practices

IMF International Monetary Fund

IOSCO International Organization of Securities Commissions

IRN Internal Relations Network

Member Member of the General Meeting of IAIS

member member of other bodies than the General Meeting of IAIS, e.g. member ofParent Committees, Subcommittees

MENA Middle East & North Africa

NAIC National Association of Insurance Commissioners (US)

NGO Non-Governmental Organisation

OECD Organisation of Economic Co-operation and Development

PRA Prudential Regulation Authority (U.K.)

ROSC Report on Observance of Standards and Codes

SAPR Supervisory Self-Assessment and Peer Review

SOSC IAIS Standards Observance Subcommittee

TF IAIS Task Force

TFEU Treaty on the Functioning of the European Union

TRN Transnational Regulatory Network

WG IAIS Working Group

WTO World Trade Organization


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LIST OF BOXES

Box 1: Excerpts from the Report from Expert Team Conducting the IAISSAPR of Insurance Core Principles (ICPs) 4, 5, 7 and 8 35

LIST OF FIGURES

Figure 1: IAIS Organisational Structure 14Figure 2: IAIS Members by Continent 13Figure 3: Votes in General Meeting of IAIS 15Figure 4: Proportion of premium market share and IAIS votes 18Figure 5: IAIS committee engagement; proportion of participants of all

Parent Committees and Subcommittees 21Figure 6: IAIS process of development of materials and stakeholders policy 24Figure 7: IAIS Membership fees paid by continent 25Figure 8: Comparison insurance market share vs IAIS fees paid per region 26Figure 9: IAIS Membership of ExCo per region, voting and non-voting

members combined 28Figure 10: Description of IAIS Activities 31Figure 11: Implementation of IAIS Framework - Feedback Loop 36Figure 12: Top 40 global (property and casualty (P&C)/non-life) insurance

groups according to region of headquarter, domestic versus internationalmarket, 2013 48

Figure 13: IAIS - S-curve 1 and S-curve 2, level of achievement, 1997-2019 51

LIST OF MAPS

Map 1: IAIS Members 12

LIST OF TABLES

Table 1: IAIS ComFrame and capital standards milestones 2013-2019 30Table 2: Participation in the Financial Sector Assessment Program (FSAP)

for FSB-EU Member Jurisdiction 52Table 3: An Overview of EU-US Influence in BCBS, IAIS and IOSCO 56


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EXECUTIVE SUMMARYMember States and European institutions/agencies, including the Commission, the ECB,and - since 2011 - the ESA’s, have been active in varying composition in differenttransnational networks of standard setters, often called ‘international organisations’,although this denomination should be reserved for those being set up by Treaty. Theincreased role of these standard setters may be perceived as limiting the leeway forindependently shaping the policy of the Union. One of these networks is IAIS, theInternational Association of Insurance Supervisors.

This perception may be valid but seems to depend on the network: whether the focus ispurely on exchange of good practices and knowledge on improving supervision, or whetherthe focus glides towards (influencing) regulation, and if so, how the outcome of this work isformulated and what its impact may be, especially via moral suasion mechanisms.

IAIS, a non-profit private association, with worldwide insurance and reinsurancesupervisors as Members, focusing on principles and standards for insurance supervision,became one of the international standard setters (recognised by the IMF, World Bank, FSB)for the financial sector, based on the importance of its Insurance Core Principles (ICPs).

Looking at the role of the EU in IAIS, a key conclusion is that the Union is well representedin IAIS by the Commission, by EIOPA as well as by the Member States’ supervisoryauthorities. This set-up results in a high participation throughout all internal bodies of theAssociation, from the highest decision-making body to the Parent Committees andSubcommittees, with more than 150 people involved in total. Each of the representativesplays a different but complementary and mutually beneficial role, in a coordinated but notuniform fashion. As a result of both, the demonstrated commitment and investment, theEuropean issues are well captured at IAIS.

Currently, IAIS stands at a decisive point in its history: it is developing from anorganisation that was focused on supervisory cooperation and information exchange into aglobally respected standard setter with a new ambitious additional focus. IAIS embarkedalso recently on a revised, open, and not-fee based, stakeholder policy.

The new additional focus of IAIS on the development and implementation of InternationalCapital Standards (ICS) and other projects, stimulated by the FSB, is not only a veryambitious new phase for IAIS, but is equally important for the EU. Key concepts of the EU-originated Solvency II framework found their way worldwide and into IAIS standards andprinciples, but a similar outcome in the area of ICS must be carefully crafted. Preconditionsfor a positive outcome are there. Given the fact that the ICPs are a part of the IMF’sFinancial Sector Assessment Programmes (FSAPs), also the ICS, if and when ready, willfind their way into these assessments. Although the increased arsenal of moral suasioninstruments does in theory not impinge on the right of the legislator, there is a ‘repetitioneffect’. Therefore, these developments should be carefully monitored.


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1. ORGANISATION

KEY FINDINGS

IAIS is a non-profit association according to the Swiss Civil Code, with an extensiveworldwide membership of insurance and reinsurance supervisors and regulators,including all major economies, focused on promoting effective and globallyconsistent supervision of the insurance industry.

The Union is well represented and the largest region within IAIS. The current IAISchair is European. While it is true that the European Commission has no voting right,the Union’s participants (Commission, EIOPA, Member States’supervisors/regulators) account for 22 % of the membership, 20 % of the votingrights in the General Meeting, 27 % of the fees, and 21 % of the votes of theExecutive Committee (ExCo), which de facto ‘runs’ the Association as it primarilydecides on the standards. EU ExCo candidatures are coordinated by EIOPA. EIOPAconsiders its involvement in the IAIS one of its highest priorities.

IAIS has five Parent Committees (reporting to the ExCo), three of them are chairedby European supervisors, and 20 Subcommittees. There is also a solidrepresentation of the Union’s participants in all Parent Committees andSubcommittees: of the more than 400 supervisors, which are members of these(Sub)Committees, 36 % are from the EU, including the Commission and EIOPA. As aresult, the European issues are well captured.

IAIS had for many years an active but fee-paying observer group, responsible for upto 40 % of its income. While it was recognised that observers’ input was beneficial,IAIS changed last year its observer policy to an unpaid, open, and extensivestakeholder participation policy. 2015 will be the first year this new policy will beapplied; a detailed process has been published early 2015. This policy will also testIAIS's transparency.

IAIS has a streamlined process of development of materials. IAIS’ activities focus onthree pillars: standard setting, implementation and financial stability. Since 2013, ithas embarked on an important new deliverable: International Capital Standards.

IAIS depends on Member’s jurisdictions and the powers of its Members to transposesupervisory material. While IAIS’ work outcome does not create international legalobligations, it has developed a whole arsenal of indirect mechanisms to stimulatemembers into compliance. Important to note in this regard are the IAIS’ Self-Assessments and Peer Reviews (SAPR) which can be considered as a dry run for anFSAP.

Member States and EU institutions, such as the European Commission, have been active ininternational organisations and fora which work on international standards and policyguidelines which have an effect on the shaping of EU policy. As a consequence of theeconomic and financial crisis, this has become very apparent over the last years, inparticular in the financial services and monetary sector. This is why the EuropeanParliament is interested in the Role of the European Union (EU) in international fora.

For the EU, mainly the European Commission, but also the ECB and (recently) the differentESA’s, have been participating in international economic fora, some of which are Treatyorganisations, such as the OECD, but most are not. However, in most of them policydiscussions have taken place and international standards are being developed. Given theincreased (perceived) importance of these fora, the paper series (of which this paper is


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one) on the EU's role in international economic fora provides a deeper understanding of

the governance of the European participation, and especially of the EuropeanCommission's participation in these international fora and its transparency;

the accountability, namely to the European Parliament; the transparency on the discussions within these fora which sometimes causes

issues when implementing international standards into EU law.

This paper provides factual background information about IAIS, its coordination,accountability and impact, the EU’s role and representation in IAIS, as well as an evaluationof IAIS compliance with the Rules & Practices for Accountability of InternationalOrganisations.

1.1. Legal statusIAIS is a voluntary membership association of insurance supervisors and regulators,with separate legal personality, founded as a private Swiss, non-profit organisation1

formed under Article 60 of the Swiss Civil Code2 (a ‘Verein’), established in 19943 anddomiciled in Basel, Switzerland. IAIS’ 153 Members4 represent nearly 140 countries and areencompassing over 200 jurisdictions5. IAIS was initially created in the US by a group ofinsurance supervisory officials from different countries with a strong interest in developinginternational contacts and establishing a forum for cooperation6.

1 Consequently, IAIS is not an international organisation according to the definition ‘An internationalorganization can be defined, following the International Law Commission, as an ‘‘organization established by atreaty or other instrument governed by international law and possessing its own international legalpersonality’’’. A more precise qualification is ‘transnational policy network’, see Slaughter.

2 Article 60 Schweizerisches Zivilgesetzbuch (Swiss Civil Code).3 Article 1 of the IAIS By-Laws, version adopted on 25 October 2014 (hereafter called By-Laws); under Swiss

Law, non-profit organisations have no obligation to publish their By-Laws in the Commercial Register.Therefore, the English version (published online) of the By-Laws has been used for this paper.

4 IAIS, 2015 Annual Member Fees, updated 13 February 2015. NAIC is one Member having max. 15 votes(Article 6 (4) IAIS By-Laws) and encompassing 56 jurisdictions, see point 1.3.1 Members.

5 IAIS, Homepage. However, based on our own calculations, the precise amounts are the following: 146countries, encompassing 190 jurisdictions. The difference between countries and jurisdictions is due to:a) the EU (27 ‘jurisdictions’ are Members, i.e. 26 Member States plus the EU/EIOPA; Croatia and Greece arenot IAIS Members, but could be regarded as being represented via EIOPA); b) the US (1 country, 57jurisdictions, i.e. 56 States plus Federal Jurisdiction), and c) CIMA (14 countries, 1 jurisdiction). The differencebetween Members and countries is due to the correction for double memberships per country, internationalorganisations, and the EU (33 Members, 28 countries, 32 votes, 27 jurisdictions), the US (3 Members, onecountry, 17 votes), and CIMA (1 member, 14 countries); see IAIS, 2015 Annual Member Fees and Annex II.

6 IAIS, 20 years, 1994-2014, p. 2 ff.: IAIS’ origins are in the 1980s when insurance regulatory officials fromvarious countries began to meet at the Summer Meeting of the US NAIC. In June 1990, a Working Group ofrepresentatives from Australia, the Bahamas, Belgium and the US was established as participation continued togrow over the years in numbers and geographic representation. Achieving a more formal association with agreater degree of independence and self-organisation became necessary. The group proposed the creation ofan association, initially based in Kansas City. In 1994, IAIS was incorporated as a non-profit corporation inSpringfield, Illinois. In October 1996, IAIS agreed to become an insurance standard setter, relocated itsSecretariat to Basel, and became an association, see above. So, ‘IAIS started from a small group whose mainfocus was enabling supervisory cooperation and information exchange and became the international insurancestandard setter and an integral part of the effort to ensure global financial stability that it is today.’


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1.2. Mission and objectivesThe mission of the association is to promote effective and globally consistentsupervision of the insurance industry in order to develop and maintain fair, safe andstable insurance markets for the benefit and protection of policyholders; and to contributeto global financial stability7. In its Newsletter, IAIS refers to itself as a ‘global standardsetting body’8.

1.3. Governance structure

1.3.1. MembersThe entities, which are eligible to be a Member, are:

An insurance industry supervisor who exercises its function within its jurisdiction, aslong as such supervisor or regulator does not actively underwrite, sell or otherwiseprovide insurance;

The NAIC9;

The FIO10;

The European Commission;

An international organisation made up of governments or statutory bodies that theExCo may recommend to be eligible for membership for the purpose of furtheringthe mission of the Association11.

7 ‘In furtherance of its mission, the Association will, in particular: develop principles, standards and guidance forthe supervision of insurance markets; support the implementation and practical application of its principles andstandards; develop methodologies for the assessment of the observance of its principles and standards, andfacilitate assessment processes; encourage broader contacts and co-operation amongst insurance and othersupervisors and facilitate mutual assistance, education and training on insurance supervision and the exchangeof supervisory information; engender awareness of common interests and concerns amongst insurance andother supervisors and identify potential risks that may affect insurance supervision; liaise and co-operate withother international organisations, particularly those involved in issues of financial markets supervision andpromotion of financial growth, stability and integrity; and represent a body of informed opinion within the fieldof insurance supervision and, where appropriate, communicate such views, ideas and experience to thirdparties.’, Article 2 (2) of the By-Laws.

8 See for example IAIS, Newsletter January 2015, p.1 and IAIS, Newsletter December 2014, p. 1.9 National Association of Insurance Commissioners (NAIC) is organised under the General Corporation Law of the

State of Delaware, United States. NAIC is the U.S. standard-setting and regulatory support organisationcreated and governed by the chief insurance regulators from the 50 states, the District of Columbia and fiveU.S. territories. NAIC was created in 1871 to address the need to coordinate regulation of multistate insurers.Through the NAIC, state insurance regulators establish standards and best practices, conduct peer review, andcoordinate their regulatory oversight; see http://www.naic.org/index_about.htm.

10 Federal Insurance Office, US: ‘established by Title V of the federal Dodd-Frank Wall Street Reform andConsumer Protection Act of 2010 (Dodd-Frank). The FIO is housed within the U.S. Department of the Treasuryand is headed by a director who is appointed by the secretary of the Treasury. While the FIO serves animportant role by providing necessary expertise and advice regarding insurance matters to the TreasuryDepartment and other federal agencies, it is not a regulatory agency and its authorities do not displace thetime-tested robust state insurance regulatory regime.’; see NAIC, Topic on FIO.

11 Article 6(1) of the By-Laws. Examples are the IMF, the World Bank, the Asian Development Bank, the OECD.


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Map 1: IAIS Members

Note: Members; Non-MembersSource: www.iaisweb.org12, www.amcharts.com, ICODA European Affairs-Lowet analysis, March 2015.

Members have the right to vote and to participate in the affairs of the Association. Byexception on these voting rights, the NAIC, the European Commission and theinternational organisations are explicitly excluded from voting in the General Meeting13.The European Commission and the international organisations are also explicitly excludedfrom being a member of the ExCo14.

Concerning the 56 jurisdiction of the USA15, the NAIC may designate a maximum of 15 ofits members, which are US State jurisdictions, to exercise their rights to vote16. In addition,the FIO and the Federal Reserve are also voting members17. For a full list of currentMembers as of February 2015, see Annex II.

12 IAIS, 2015 Annual Membership fees, updated 13 February 2015. This list has been used throughout the studyas basis for all calculations.

13 Article 6(5) of the By-Laws. Prior to the change in the By-Laws of October 2014, the European Commissionwas considered in the category International Organisations; the latest change of the By-Laws give it a separatestatute but which de facto does not differ from the previous one.

14 But either NAIC, FIO or the Federal Reserve are eligible to be member of the Executive Committee.15 51 US States plus Guam, American Samoa, Virgin Islands, Puerto Rico and Northern Marina Islands.16 Article 6(4) of the By-Laws.17 Article 6(2)c and (5) of the By-Laws. For some comments on the Federal Reserve’s membership, see for

example Shrestha, B., Fed’s new role at IAIS escalates jurisdictional wrangling, 20 February 2014.


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Figure 1: IAIS Members by Continent

Note: 153 Members in total, based on continents, not ‘geographic areas’, see Article 13(5) of the By-Laws. NorthAmerica is considered to consist of the US and Canada. US State supervisors are not individual Members of IAIS.NAIC, as representative of the US State supervisors, has only one membership but counts for 15 votes and is theonly IAIS Member with multiple votes. For the voting division, see Figure 3.Source: www.iaisweb.org, ICODA European Affairs-Lowet analysis, March 2015.

1.3.2. Internal bodiesInvolved in the decision-making process are the General Meeting of Members, the ExCo, itsParent Committees and Subcommittees, and the Secretariat, see Figure 2 below.


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Figure 2: IAIS Organisational Structure

Source: www.iaisweb.org, March 2015.


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General Meeting of Members

Composition and Chair: The General Meeting is composed of all Members and chairedby the Chairman of the ExCo. Current Chairman is Felix Hufeld, BaFin President18. FelixHufeld was elected Chairman in October 2014, when he succeeded Peter Braumüller,Managing Director at the Austrian Finanzmarktaufsicht (FMA), in charge of supervision ofinsurance companies and pension funds.

Voting rights, quorum and competences: The General Meeting decides by a two-third19

or a simple majority20 of Members casting a vote. The IAIS By-Laws do not foresee anyparticular voting modality regarding the European Union (Member States), with exceptionof the European Commission having no voting rights21 while all participating EUMember States - plus EIOPA - have voting rights. Germany22, Belgium23, Finland24, theNetherlands25 and the United Kingdom26 have two votes due to multiple memberships.

Figure 3: Votes in General Meeting of IAIS

Note: 162 votes in total.Source: www.iaisweb.org, ICODA European Affairs-Lowet analysis, March 2015.

18 BaFin, News of 4 February 2015.19 The two-third majority is applied for the following competences: to amend the By-Laws; on the location of the

offices of the Association; to adopt principles, standards, and guidance developed by the Association or otherpersons or entities not already adopted by the ExCo under Article 14(6)(f) of the By-Laws; and to dissolve theAssociation.

20 Simple majority is required for the following competences: decide upon the manner in which a General Meetingconducts its affairs; approve, defer consideration of, or reject applications for participation in the Association;cancel an entity’s status as a Member; elect members of the Executive Committee; approve the annual budgetand fees to be paid by Members and business plan of the Association; appoint an independent auditor for theAssociation; approve the audited financial statements and the Annual Report of the Association, and releasemembers of the Executive Committee from their responsibilities in respect of the past financial year; anddecide on any other matter governing the business and affairs of the Association.

21 Article 6(5) of the By-Laws.22 BaFin and Federal Ministry of Finance.23 FSMA and NBB.24 Financial Supervisory Authority and Ministry of Social Affairs and Health.25 De Nederlandsche Bank and AFM.26 PRA and Financial Conduct Authority.

20%

11%

22%16%

12%

6%

13%

EU Non EU Europe Asia

South America North America Oceania

Africa


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Executive Committee

Composition and Chair: The Executive Committee, called ‘ExCo’, is considered the bodythat is effectively running the IAIS. It comprises, for a two years term:

A minimum of nine and a maximum of twenty-four voting members, representedby natural persons, elected by the General Meeting and

Non-voting members, consisting of the presiding Chair of the TechnicalCommittee, the presiding Chair of the Implementation Committee, the presidingChair of the Budget Committee and the presiding Chair of the Financial StabilityCommittee (unless they are already voting member)27.

The ExCo is limited to one voting member only per IAIS Member and in principle perjurisdiction28. An elected member can be re-elected after the expiry of the term. The ExCois composed of an appropriate representation of the different geographic areas anddifferent types of insurance markets, particularly in respect of the market sizes anddevelopment29. The particular division of geographical areas is as follows30

(representatives mentioned in the footnotes are according to correspondence with IAISSecretariat as of 11 March 2015): North America31, MENA (Middle East & North Africa)32,CEET (Central and Eastern Europe and Trans Caucasia)33, Sub-Saharan Africa34, WesternEurope35, Offshore and Caribbean Region36, Asia37, Oceania38 and Latin America39. Exceptfrom this geographical equilibrium, no voting modality regarding joint EUrepresentation is foreseen in the IAIS By-Laws.

27 Article 13 of the By-Laws. The Chair of the Audit and Risk Committee is not a member of the ExCo.28 Article 13(5) of the By-Laws. The US has however currently three voting-members in the ExCo.29 Article 13(5) of the By-Laws.30 Article 13(4) of the By-Laws: ‘If in any case a member of the Executive Committee resigns or, for any other

reason, is unable to continue serving as a member until the expiration of his or her term, the ExecutiveCommittee (and not the General Meeting) appoints the replacement. In certain exceptional circumstances theChair of the Executive Committee can decide to close the meeting. Exceptional circumstances includeadministrative or internal matters, discussions on confidential or highly sensitive data and information, votingon election of Chairs and Vice-Chairs, potential or pending litigations or investigations or any matter requiredto kept confidential under any agreement, law or order. The Chair can invite and admit experts or otherrelevant guest to the Executive Committee.’

31 The current representatives of the North American region are: Bernard Dupont, Canada/OSFI; Julie McPeak,USA/Tennessee; Michael McRaith, USA/FIO/Treasury (Chair of the Technical Committee, non-voting member);Kevin McCarty, USA/Florida (Vice-Chair) and Kenneth Kobylowski, USA/New Jersey; Manual Aguilera-Verduzco,Mexico.

32 The current representatives of the MENA-region are: Khalid Althieb, Saudi Arabia and Walid Genadry, Lebanon.33 The current representative of the CEET is Damian Jaworski, Poland.34 The current representative of Sub-Saharan Africa is Jonathan Dixon, South Africa.35 The current representatives of the Western Europe region are: Gabriel Bernardino, EIOPA; Sandrine Lemery,

France; Felix Hufeld, Germany, BaFin (Chair); Alberto Corinti, Italy (Chair of the Financial Stability Committee,non-voting member); Peter Giger, Switzerland; Victoria Saporta, UK, PRA and Peter Braumüller (Chair of theBudget Committee, non-voting member).

36 The current representatives of the Caribbean Region are: Cindy Scotland, Cayman Islands and William Mason,Guernsey.

37 The current representatives of Asia are: Junbo Xijang, China; TS Vijayan, India; Takashi Hamano, Japan (Vice-Chair); Heungchang Park, Korea; Ken Yi Lee, Singapore.

38 The current representative of Oceania is Ian Laughlin, Australia.39 The current representatives of Latin America are: Ernesto Rios, Chile and Daniel Schydlowksy.


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A person employed by the European Commission or an international organisation asmentioned in article 6(e), is not electable for the ExCo40. This means that the EuropeanCommission has never been a member of the ExCo. However, every Member isentitled to attend the ExCo meetings (without voting rights). The Commission madeconsequently use of its possibility to attend the ExCo meetings.

As mentioned (see chair of the General Meeting)41, the current chair42 of the ExCo is FelixHufeld, BaFin. Vice-chairs are Takashi Hamano, Japan, and Kevin McCarthy, Florida, USA.The ExCo currently43 consists of 24 voting and three non-voting members. For the fullcomposition of the ExCo, see Annex III.

Voting rights, quorum and competences: Decisions must be taken with a doublemajority44; first, by the quorum consisting of the majority of the voting members andsecond, by simple majority of those voting members casting a vote. In case of equality ofvotes, the person acting as chair at the meeting shall have a casting vote, in addition to thedeliberative vote. Voting did not often occur in the past since the ExCo mostly decides byconsensus.

A two-thirds majority of all ExCo voting members is required to adopt principles, standardsand guidance, as referred to in Article 14(6)(f) of the IAIS By-Laws. Written procedure ordistant voting is foreseen; the vote can also be taken in a session which is open to allIAIS Members45. The ExCo shall take all decisions necessary to achieve the mission of theAssociation in accordance with the directions given by the General Meeting46. The ExCoapproves the standards but can be overruled by the General Meeting under certainconditions. IAIS By-Laws do not specify the frequency of meetings.

40 Article 6(5) By-Laws.41 See Section 1.3.2. Internal bodies.42 Article 13(6) By-Laws: ‘The chair of the Executive Committee is elected from within its members for two years

or until the expiry of his or her term as a voting member of the Executive Committee whichever is earlier. Re-election is possible after expiry of the term if the chair continues to be a voting member of the ExecutiveCommittee. The same conditions apply for the vice-chair(s).’

43 Research closed on 25 March 2015.44 Proxies are possible, but must be appointed in writing and can be natural persons who are either wholly or

principally employed by the same member as the voting member or another member of the ExCo.45 Article 13(8) IAIS By-Laws.46 Article 14 By-Laws. The competences of the ExCo include the following: ‘to prepare amendments to the By-

Laws to be made by the General Meeting; to call a General Meeting; to consider applications for participation inthe Association and make recommendations to the General Meeting in relation to such applications; to preparea program of activities of the Association, an Annual Report and an annual budget including the fees to be paidby Members to be approved by the General Meeting; to ensure that principles, standards and guidance to beadopted by the Association have been subject to an adequate consultation process among IAIS Members andstakeholders; to adopt principles, standards and guidance developed by the Association or other persons orentities, unless either the Executive Committee decides to defer such decision to the General Meeting or atleast 10 % of Members who have the right to cast a vote at the General Meeting request in writing by the endof the consultation process to defer such decision to the General Meeting; to assure effective and efficientworking structures that fulfil the Association’s mandate, while balancing yearly budgets; to recommend to theGeneral Meeting decisions regarding the business and affairs of the Association; to prepare the programme ofthe annual conference and to take key decisions for the preparation of the conference; to appoint theSecretary General and oversee the functioning of the Secretariat; to carry out other duties assigned to it bythe General Meeting; and to do all things necessary to ensure the sound functioning and furtherance of themission of the Association.’


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Figure 4: Proportion of premium market share and IAIS votes

Note: 162 votes in total in the General Meeting; 24 votes in total in ExCo.Source: www.iaisweb.org, ICODA European Affairs-Lowet analysis, March 2015.

Committees and Subcommittees

The ExCo established, according Article 14 IAIS By-Laws, the following committees, oftencalled Main or Parent Committee:

A Technical Committee: to develop international principles, standards, guidanceand other documents related to insurance supervision;

An Implementation Committee: to work on issues related to assessments andassistance in implementation of IAIS principles, standards and guidance;

A Budget Committee: to propose an annual budget and annual fees of Members tothe ExCo, reasonably foreseeing all financial, relevant and material activities of theAssociation and to report periodically to the ExCo on the financial situation of theAssociation;

An Audit and Risk Committee: to review the internal controls of the Associationand monitor that its activities achieve their objectives through effective and efficientoperations and are compliant with applicable procedures and resolutions. It shallconsist of at least three members appointed by the ExCo and shall deliver an AnnualReport to the General Meeting; and

A Financial Stability Committee: to work on issues related to financial stability,systemic risk, and macro prudential supervision and surveillance47.

47 Article 14(3) of the IAIS By-Laws.


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The ExCo also established the Supervisory Forum48, the Coordination Group49, the G-SII Methodology Task Force and the Selection Committee50. In 2014, the ExCo agreedon merging the Technical Committee and the Financial Stability Committee51. As ofJanuary 2016, this merger should enter into effect. The Committees are each(vice-)chaired by a natural person, appointed by the ExCo52. All Chairs must report tothe ExCo53.

IAIS’ By-Laws do not specify the term of the Committee chairs and vice-chairs,except for the Audit and Risk Committee, where the term is limited to one year. The IAISBy-Laws however refer to procedures established by the ExCo54 but these are not publiclyavailable.

The ExCo, as well as the Parent Committees may establish Subcommittees that help carryout their respective duties55. Several Subcommittees, mostly called working groups or taskforces, have been established. As of March 2015, 20 Subcommittees were identified inIAIS’ organisational structure:

Subcommittees reporting to the ExCo:

G-SII Methodology Task Force56;

Coordination Group57;

Supervisory Forum;

Selection Committee.

Subcommittees reporting to the Technical Committee:

Accounting and Auditing Working Group58;

Governance Working Group59;

Insurance Groups Working Group60;

48 Established in 2011. It provides expert input from a supervisory practice perspective to IAIS activities. Itsuccessfully developed into a forum in which fruitful discussion takes place between its members on topicalissues from a front-line supervisory perspective. Members are senior practitioners involved in the supervisionof IAIG’s. It acts as a sounding board and provides input into other IAIS work. It routinely discusses matters,referred to it by other Subcommittees as well as emerging and topical issues relevant for the supervision ofIAIG’s. Its summaries of discussion are available to all IAIS members. Representatives from otherSubcommittees and experts on a specific subject matter can attend its meetings to explore specific topics. TheSupervisory Forum meets four times a year, and the secretariat is provided by NAIC for the time being. TheSupervisory Forum is chaired by Doug Slape (USA, Texas), who replaced Jörg Krause (Germany, BaFin) who isnow Vice Chair. The Supervisory Forum’s Secretariat support is provided by the NAIC, see IAIS, Annual Report2013-2014, p.32; IAIS, press release of 9 June 2011.

49 It is composed of the chairs and vice-chairs of the Parent Committees. The Coordination group was installed inSeptember 2013 to facilitate project management, coordinate the work of the main committees and makerecommendations to the ExCo regarding the two-year roadmap. This Group and the ExCo will annually reviewthe deliverables and relative priority of each Subcommittee’s work. IAIS, Annual Report 2013-2014, p. 8.

50 Note that the Selection Committee is not included in IAIS’ organisational structure as made public by IAIS (seefigure 1); source : interviews ExCo members.

51 IAIS, Annual Report 2013-2014, p. 8.52 Except for the Audit and Risk Committee and Supervisory Forum electing a chair from among its members;

Article 14(4) of the IAIS By-Laws.53 Article 14(5) of the IAIS By-Laws.54 Article 15(2) of the IAIS By-Laws.55 Article 15(1) of the IAIS By-Laws.56 Chair: Michael McRaith, USA; Vice-Chair: Alberto Corinti, Italy.57 Chair: Jonathan Dixon, South Africa; Vice-Chair: Michael McRaith, USA.58 Chair: Markus Grund, Germany, BaFin; Vice-Chair: Rob Esson, USA, NAIC.59 Chair: Annick Teubler, Netherlands; Vice-Chair: Susan Donegan, USA, Vermont.


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Market Conduct Working Group61;

Financial Crime Task Force62.

Subcommittees reporting to the Implementation Committee:

Financial Inclusion Working Group63;

Signatories Working Group64;

Supervisory Development Working Group65;

SAPR Task Force on Market Conduct;

SAPR Task Force on Supervisory Measures.

Subcommittees reporting to the Financial Stability Committee:

G-SII Analysts Working Group66;

Macro-prudential Policy and Surveillance Working Group67;

G-SII Policy Measures Task Force68.

Subcommittees reporting jointly to the Technical Committee and the FinancialStability Committee:

Resolution Working Group69;

Capital Development Working Group70;

Field Testing Working Group71.

Neither the Budget Committee nor the Audit and Risk Committee have establishedSubcommittees. IAIS’ By-Laws do not specify the frequency of meetings.

60 Chair: Petra Faber-Graw, Germany, BaFin; Vice-Chair: Julia Rathgeberger, USA, Texas.61 Chair: Olivier Fliche, France; Vice-Chair: Leanne Jackson, South Africa.62 Chair: Philip Goodman, USA, FIO.63 Chair: Sriram Taranikanti, India; Vice-Chair: Rosemarie Henry, Jamaica.64 Chair: Michael Kehr, Germany, BaFin.65 Chair: Walid Genadry, Lebanon; Vice-Chair: François Tempé, France.66 Chair: Sebastian van Dahlen, Germany, BaFin; Jean-Baptiste Fellers, France.67 Chair: Edward Toy, USA, NAIC; Christian Schmidt, Liechtenstein.68 Chair: Randall Dodd, USA, FIO; Stanislav Georgiev, Germany, BaFin.69 Chair: Urs Halbeisen, Switzerland; Vice-Chair: Tom Crossland, UK, PRA.70 Chair: John Maroney, IAIS Secretariat.71 Chair: Paolo Cadoni, UK; Vice-Chairs: Ian Marshall, South Africa, Tom Finell, USA, FIO.


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Figure 5: IAIS committee engagement; proportion of participants of all ParentCommittees and Subcommittees

Note: 718 seats in total; 421 participants in total. This overview does not include the participants of the G-SIIMethodology Task Force and the Coordination Group.Source: www.ncoil.org, May 2014, ICODA European Affairs-Lowet analysis.

Secretariat

The IAIS is hosted by BIS and the staff is hired by BIS but (with some exceptions) paid forby IAIS72. The Secretariat’s main responsibilities are:

To support the activities of the Association;

To ensure efficient communication among Members, stakeholders and others;

To maintain and reinforce the Association;

To facilitate cooperation with other institutions;

To manage the financial, material and human resources of the Association in aproper way and in accordance with the authorised budget;

To carry out all other functions assigned to it by the ExCo73.

1.3.3. Stakeholder InvolvementThe By-Laws of IAIS contain no separate section concerning stakeholderinvolvement but rather a general obligation to consult.

According to Article 2(3), the Association has the obligation to operate in an openand transparent manner. This includes, during the development of the Associationssupervisory and supporting material, a public consultation and the obligation tomake its consultation procedures transparent.

72 Source: Correspondence with IAIS.73 Article 16 of the By-Laws.


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Article 14(6)(e) creates the duty for the ExCo to ensure that principles, standardsand guidance adopted by the Association have been subject to an adequateconsultation process among IAIS Members and stakeholders.

Article 16(2)(b) obliges the Secretariat to ensure efficient communication amongMembers, stakeholders and other interested parties.

In January 2015, a new extensive stakeholder policy entered into force, replacing theformer (paid) observership policy. Until the General Assembly of October 2014, non-Members could have paid observer membership status.

In a closed session at the annual General Meeting74, the Members of the IAIS voted toamend the IAIS By-Laws, hereby making an end to the paid observership status of allobservers, starting as of 1 January 201575. Although the ExCo recognised that the IAIS hadbenefited from observer input76, it wanted to ‘seek approval from the General Meeting toestablish a more open and transparent process in which any interested stakeholder canreceive information and contribute […] without the necessity of formally becoming anobserver and paying a fee’77.

Former observers78 and the US Congress79 criticised the change in stakeholder policy,fearing that stakeholders will be confronted with several difficulties concerningtransparency and involvement. IAIS has always had a two-step consultation process. Mostpapers and standards produced by IAIS were consulted throughout their development withobservers, which could attend (and occasionally speak in) open meetings of IAIS(Sub)Committees. Extensive interactions, exchanges and consultations took place, both inthe conceptual phase, as in the further development of materials, avoiding unintendedconsequences and allowing for clarifications within the drafting process. IAIS held alsopublic written consultations for all stakeholders on final drafts.

However, for IAIS’ Members, the financial aspect was an important consideration to decidein favour of the cancellation of the observer status. In 2013, observers fees counted for40 % of total income80. The financial reliance of IAIS on observer fees ‘andextensive participation of observers in Working Party meetings’81 could have ledto (the impression of) conflicts of interests, especially because most of theobservers represented the industry (see also Section 2.4.).

74 Which took place on 25 October 2014 in Amsterdam.75 IAIS, Newsletter, November 2014, p. 7-8.76 See for example IAIS, Global Systemically Important Insurers: Policy Measures, 18 July 2013, p. 2: ‘In

addition to active participation of its Members, the IAIS benefits from input in select IAIS activities fromObservers representing international institutions, professional associations and insurance and reinsurancecompanies, as well as consultants and other professionals.’

77 IAIS, Annual Report 2013-2014, p. 9.78 IAIS, Compiled Public Comments on Revised Policies and Procedures.79 H.RES.735 - Expressing the sense of the House of Representatives that recently proposed measures that will

reduce transparency and public participation at the International Association of Insurance Supervisors (IAIS),18 September 2014; S.Res.561 - A resolution expressing the sense of the Senate that recently proposedmeasures that will reduce transparency and public participation at the International Association of InsuranceSupervisors (IAIS) should be disapproved by U.S. representatives to the IAIS; 18 September 2014.

80 In 2013, the observership fee amounted to CHF 19,000 resulting in a total income of CHF 2,601,900 being40 % of total fee income; see IAIS Year Report 2013-2014 and IAIS Strategic Plan and Financial Outlook2011-2015.

81 Source: Correspondence with IAIS.


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Observers, typically included, prior to 2015, insurance and reinsurance undertakings andgroups, NGO’s, insurance and reinsurance industry associations, consultants, consumeradvocates, insurance experts, lobbyists. There were 148 observers, of which 33 of EUorigin who each paid, e.g. in 2014, an annual fee of CHF 20,40082 for this participation. All,but three83, observers represented industry. After the cancellation of the observer status,all archives of observers’ comments have been deleted from the public section of the IAISwebsite.

New policy to ensure stakeholder involvement84: As an alternative to (industry’s)observer status, IAIS announced that it would hold regular stakeholder meetings andundertake new other stakeholder commitments85. In addition, IAIS introduced thepossibility to invite individual stakeholders to meetings to provide targeted input and makestatements on particular topics as well to make general comments86. In February 2015,IAIS adopted and published the new extensive stakeholders participation policyonline. Now, ‘stakeholders means all groups or individuals with an interest in IAIS activitieswithout the need of paying an annual fee’87.

Planned for 2015 are stakeholders’ meetings and telephone conferences in three particularWorking Groups: the Field Testing Working Group, the Capital Development WorkingGroup88 and the Governance Working Group. Stakeholders can subscribe to an e-mailnewsletter for regular information on, among others, stakeholder meetings, other events,news, updates on the website of materials, updates from (Sub)Committees etc. 2015 willbe the first year to ‘test’ this new policy.

82 In 2014, the fee for observers amounted to CHF 20,400; see IAIS Year Report 2013-2014 and IAIS StrategicPlan and Financial Outlook 2011-2015.

83 Only the Latvian National Association for Consumer Protection, the Indian Voice Society and the NAICConsumer Representatives, which all joined in 2013, did not represent the industry. The Latvian NationalAssociation was surveyed for this study but did not reply.

84 IAIS new stakeholder Commitments: ‘All supervisory and supporting material will be subject to publicconsultation. (previously only required only among Members and fee-paying Observers.); a public backgroundnote will be issued upon approval of any plan to develop or revise supervisory and supporting material; apublic background session will be held at the time a public consultation begins; all comments as well asresponses to all comments received during a public consultation will be published. (previously only to Membersand Observers.); a public session will be held to discuss comments received, resolutions of comments and nextsteps during every consultation; there will be advance notice of the final draft of supervisory and supportingmaterial prior to its adoption; subject matter hearings/dialogues will be open to the public. In 2015, 7 days, ormore than 50 hours, of hearings have already been scheduled. (In 2014, there were around 10 hours ofhearings that were open only to Observers.); annual dialogues with the Executive Committee will be held;annual Member fee levels will be publicly disclosed; the schedule of committee meetings will be maintained onthe public website; the Executive Committee has a formal mechanism to create issue-specific stakeholdergroups.’, see IAIS, Newsletter, February 2015.

85 Some early stakeholder comments relate to the fact that the stakeholder meetings take place across the world,which makes it costly and time consuming to participate, especially because they are not web-streamed andthe issues discussed are de facto different in each stakeholder meeting, as the thinking and the comprehensionevolves, which is contrary to the initial purpose of the geographically widespread stakeholder meetings; thereis no consultation in the conceptual phase, in which, according former observers, an understanding of the scaleand nature of the issue is essential. In practice, the views are shaped before any stakeholder is heard.

86 IAIS, Newsletter, January 2015.87 IAIS, Policy for Consultation of Stakeholders, and Policy for Attendance of IAIS Meetings, 13.2.2015.88 IAIS, Newsletter December 2014. The meeting dates in 2015 are: 5 February, 20 March, 6 May, 12 May,

4 August and 5 October 2015.


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Figure 6: IAIS process of development of materials and stakeholders policy

Source: www.iaisweb.org; ICODA European Affairs-Lowet analysis.

A more detailed explanation of stakeholders’ participation and the consultation process isgiven in Section 1.5.7. which deals with the process of development of IAIS’ material.

1.3.4. Accountability of IAISAn extensive evaluation of the Accountability of IAIS, according to the ILA RecommendedRules and Practices (RRPs) is provided in Chapter 3.

Reporting to Members

IAIS has a Members-only extranet. Based on interviews with EIOPA and Member States’supervisors, Members are satisfied with the information available on the extranet and theinternal communication of IAIS.

Reporting to the general public

IAIS has several methods of reporting to the general public. The final materials producedby the bodies of IAIS are published on the website, summarised in the monthlynewsletters, in the Annual Report, via press releases and by an e-mail alert service.

However, this information is limited. Most of the essential information required to obtaina full understanding of the organisation and its materials produced, are probably kept inthe Members restricted part of the website, i.e. the Members’ extranet.

Development ofmaterials

• Submission of a wri en project plan to the Coordina on Group and Execu ve Commi ee• Public background note• Development of the material

Publicconsulta on

• Public consulta on• Public background session• Resolu on of comments received• Public discussion of comments and resolu on• Subsequent public consulta ons as necessary

Adop on andpublica on

• Prepara on of final dra for adop on• Final dra posted on public website• Adopted paper posted on public website


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1.3.5. Financing of activitiesRevenues

In theory, IAIS is financed by two main sources: annual fees collected from its Members,and donations, grants or other sources of revenue89. In reality, the financing is mainlybased on annual fees and contributions from BIS90.

The membership fee structure is based on GDP per capita and the insurance market size ofthe jurisdiction of the Member in terms of premiums91, see Annex V for an analysis of IAIS’financial statements. The membership fee structure for 2015 is displayed in Annex VI. Itshould be noted that this fee structure no longer includes fee paying observers. It isexpected that the gap created by the changing fee policy for observers, will be filledthrough higher membership fees and contributions from BIS92.

Figure 7: IAIS Membership fees paid by continent

Note: CHF 4,495,000 in total (budgeted for 2015).Source: 2014 IAIS Annual Member Fees, see www.iaisweb.org; ICODA European Affairs-Lowet analysis, March2015.

EIOPA, the Commission, NAIC, FIO, international organisations93, and secondaryauthorities94 have a specific arrangement for fee calculation which is not related to thesize of the jurisdiction or the premium market size which these jurisdictions represent. Incomparison, it should be noted that the EU contribution is about 2.5 times the UScontribution.

89 Article 5 of the IAIS By-Laws.90 See Annex IV for a more complete overview of this contribution. The actual contribution of BIS is not

mentioned anywhere in the annual report or its annexes.91 IAIS, Strategic Plan and Financial Outlook 2011-2015.92 Interview ExCo members.93 IMF, World Bank and OECD. The OECD does not pay a fee because a reciprocity agreement is in place, see

IAIS, Strategic Plan and Financial Outlook 2011-2015.94 These are authorities from Member States which have more than one Membership, in particular Australia,

PHIAC; Australia, NSW; Brazil, ANSS; Canada, FICOM; Canada, Quebec; Finland, Ministry of Finance;Germany, Ministry of Finance; Papua New Guinea, Ministry of Finance; Netherlands, AMF; Belgium, FSMA;United Kingdom, FCA; see IAIS, Members.


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Figure 8: Comparison insurance market share vs IAIS fees paid per region

Source: Swiss Re, Sigma, no 3/2014, World Insurance in 2013, www.iaisweb.org (March 2015), ICODA EuropeanAffairs – Lowet analysis, March 2015.

Costs

With the exception of the costs of the Annual Conference, the majority of costs are salariesand travel. For a more complete overview of 2013 financial statements and analysis, seeAnnex IV.

1.4. Current membership of the organisationAnnex II provides an overview of the current 153 worldwide members of the IAIS.

1.4.1. Participating entities and membership of the EU Member StatesFor the EU, all insurance supervisors of all Member States, except for Greece andCroatia95, are Members of IAIS. Some Member States/jurisdictions have more than onemembership, especially but not only Member States where there is a twin-peaks approachto supervision. The five Member States with dual membership are Belgium, Finland,Germany, the Netherlands and the United Kingdom.

1.4.2. Participating entities and membership of the EU bodies (EIOPA, Commission)Next to the participating supervisors/regulators of the Member States, the EU isrepresented by EIOPA and the European Commission.

EIOPA is a Member in the capacity of supervisory authority.

The Commission is a Member of IAIS with a specific statutory status, i.e. withoutvoting rights in the General Assembly and ExCo96. The creation and membership ofEIOPA did not induce the Commission to rethink its membership97.

95 These Member States are ‘represented’ by EIOPA. The reason for not being a Member of IAIS is probably thelack of resources, source: interview EIOPA, February 2015.

96 Article 6(2)(d) of the By-Laws; see also the letter of Lord Hill of 9 February 2015 to Roberto Gualtieri. TheCommission has been Member since the start of IAIS and always in the capacity of an ‘internationalorganization’. In October 2014, IAIS changed its By-Laws, hereby granting the Commission a sui generis-status. According to DG FISMA, the Commission is a regulator. It is not know why IAIS does not acknowledge


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The ECB is not a Member98. As each EU Member has one vote (except the Commission),this results in the EU accounting for 33 Members and 32 votes. It is remarkable that theG20 countries, which have an insurance premium market share of 91 %, have 26 % or42 of the 162 votes in IAIS. If all EU Member States would vote in line with G20 countries,the proportion of combined G20 votes in IAIS, including these EU coordinated votes, wouldincrease to 44 % or 70 of the 162 votes, since the vote of EIOPA would be complementedby the votes of all EU Member States. This adjusted G20 vote would however still be aminority vote.

1.5. The EU Membership in internal bodies

1.5.1. Executive CommitteeThe Executive Committee (ExCo) is currently composed of 27 members, of which24 Members have voting rights99. For a full overview of ExCo members, see Annex III.

During the ExCo meeting in October 2014, Felix Hufeld, at that time Chief ExecutiveDirector of Insurance Supervision, BaFin (Germany), was appointed as Chair of the ExCo.In addition to the chair, there are four voting EU-members and two non-votingEU-members.

It should be noted that EIOPA’s involvement in the development of InternationalSupervisory Standards within IAIS is one of the Authority’s highest priorities since itsestablishment in 2011. Therefore, already in 2011 EIOPA’s Board of Supervisors (BoS)decided that the EIOPA Chair will be granted a permanent place on the nomination listwhich is proposed to IAIS for the broader European geographical area.

On 21 May 2014100 and on 29 September 2014101, EIOPA’s Board of Supervisors endorsedthe candidates for the IAIS ExCo membership for the five seats of the Western Europeanregion including a Swiss representative, and for the single seat of the Central & EasternEuropean region. The candidates were appointed as ExCo members on 25 October 2014 fora term of two years102. The EU voting members representing EU supervisors in the ExCo103

are consequently the following104:

Felix Hufeld, Germany, Bundesanstalt für Finanzdienstleistungsaufsicht (BaFin),President;

Gabriel Bernardino, EIOPA, Chairman;

Damian Jaworski, Poland, Polish Financial Supervision Authority, Analysis andInternational Cooperation Department, Director;

the Commission as ‘regulator’ and voting member. Some EU ExCo Members share the opinion that theCommission is neither a supervisor nor a regulator, and therefore not entitled to be a voting Member of theIAIS, as they consider the IAIS as a technocratic organisation, notwithstanding the fact that the input of theCommission is unanimously considered as very valuable.

97 Commission’s reply to the survey.98 The ECB is neither an insurance supervisor nor an insurance regulator.99 The difference in voting Members and non-voting Members is due to the fact that the currently presiding Chairs

of the Technical, Budget, and Financial Stability Committee have no voting rights but can be elected to theExCo. In particular, Peter Braumüller (Budget Committee), Alberto Corinti (Financial Stability Committee), andMichael McRaith (Technical Committee) are non-voting Members.

100 EIOPA, Minutes of the BoS of 21 May 2014.101 EIOPA, Minutes of the BoS of 29 September 2014.102 Article 3(3) of the By-Laws.103 On 18 February 2015.104 In addition, as mentioned, the Swiss representative, Peter Giger, Head of Insurance Supervision and Deputy

CEO of FINMA (CH), is assigned to the Western European geographical area.


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Sandrine Lemery, France, Autorité de Contrôle Prudentiel et de Résolution (ACPR),Première Secrétaire Générale Adjointe;

Victoria Saporta, the UK, Bank of England, PRA, Head of Prudential Policy Division.

The EU non-voting members are:

Peter Braumüller, Austria Chair of the IAIS Budget Committee, Managing Director atFinanzmarktaufsicht (FMA), Austria, in charge of supervision of insurance companiesand pension funds;

Alberto Corinti, Italy, Chair of the IAIS Financial Stability Committee. Member of theBoard of Directors of IVASS - Istituto per la Vigilanza Sulle Assicurazioni.

The EU accounts for 21 % of the voting ExCo membership. All EU Members, voting andnon-voting combined, account for 26 % of all ExCo members.

Figure 9: IAIS Membership of Executive Committee (ExCo) per region, votingand non-voting members combined

Source: IAIS Newsletters, ICODA European Affairs-Lowet analysis, March 2015.

1.5.2. CommitteesThe participation of the EU in the two most important Parent Committees is as follows105:

Financial Stability Committee

- Alberto Corinti, Chair, plus eight EU Member States’ supervisors, plus EIOPAand the European Commission, or ten participants of a total of31 members106.

Technical Committee

- Urs Halbeisen, Vice-Chair, plus 13 Member States’ supervisors, plus EIOPAand the European Commission, or 15 participants of a total of 39 members107.

Furthermore, the EU Members currently chair the Budget Committee108, and provide theVice-Chair109 of the Supervisory Forum.

105 Interview EIOPA.106 Italy (Chair), Austria, France, Germany, Italy, Poland, Slovak Republic, Slovenia and UK.107 Austria, Belgium, Denmark, France, Germany, Hungary, Italy, Netherlands, (Norway), Poland, Romania,

Slovenia, Spain, Sweden and UK.108 Peter Braumüller, FMA, Austria.109 Dr. Jörg Krause, BaFin, Germany.

26%

7%4%

26%

11%

22%

4%

EU Non-EU Europe Oceania

Asia South America North America

Africa


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1.5.3. Working Groups (WGs) and Task Forces (TFs)As mentioned in Section 1.3.2., there are 14 Working Groups (WGs, permanentnature) and six Task Forces (TFs, limited mandate). The membership lists of theWGs’ participants and TFs are not publicly available, but several EU ExCo membersdeclared that there is a ‘solid representation’ of the EU in all Subcommittees. Basedon an analysis of the Committee members’ list available in May 2014110, this solidrepresentation is confirmed: among a total of 718 members, or 421 individual members(adjusted for double counting), 36 % or 152 members are from EU supervisoryauthorities, including EIOPA, and the Commission (see Figure 5. above). In eachCommittee, Subcommittee, WG and TF, EU Members are present and active.

Due to scarce resources, EIOPA has to prioritise participation in the different work streams.At expert level, EIOPA participates in several key WGs, with a focus on capital standards.Among these WGs are the Field Testing WG, the Capital Development WG and theResolution WG111. The Commission participates in the Technical Committee, theFinancial Stability Committee, and the Capital Development WG, its relevance isdecided in function of the topics of the European Commission’s working programme112. EUMember States decide to join a Committee or Subcommittee based on its nationalrelevance and resources available. As a result, genuine European issues are well captured.

1.5.4. MandateThe mandate of IAIS is given by the Members of the General Meeting to the ExCowhich in turn takes care of managing the activities of the association, in line with themission statement and a five year Strategic Plan and Outlook113, adopted by the GeneralMeeting which also supervises the Parent Committees and the Subcommittees.

1.5.5. Type and description of activitiesThe activities undertaken by the IAIS to foster its mission can be divided into three pillars:

Standard setting

The IAIS develops supervisory material (principles, standards, and guidance) foreffective insurance supervision. The IAIS also prepares supporting papers (such as IssuesPapers) that provide background on specific areas of interest to insurance supervisors.

Implementation

The IAIS actively promotes the implementation of its supervisory material. Workingclosely with international organisations, regional groups and supervisors, it supportstraining seminars and conferences and addresses financial inclusion. In addition, IAISconducts assessments and peer reviews of Members’ observance of supervisory material,consistent with the Financial Sector Assessment Program (FSAP) conducted by theInternational Monetary Fund (IMF) and the World Bank, see Annex VII for the results.

110 See www.ncoil.org, list of 19 May 2014. This list does not include the participants of the G-SII Methodology TF,the Coordination Group, the Supervisory Forum and the Selection Committee. Members of the ExCo are notincluded in the calculation.

111 Interview Gabriel Bernardino, Chairman EIOPA.112 Commission’s reply to survey.113 IAIS, Mission and 2015-2019 Strategic Goals.


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Financial stability

The IAIS plays a central role in financial stability issues, including developing amethodology for the identification of global systemically important insurers (G-SIIs) and policy measures to address systemic risk in G-SIIs. It also assists itsMembers in developing enhanced macro prudential surveillance tools114. Following IAIS’statement that it considers a sound capital and supervisory framework for the insurancesector essential for supporting financial stability and protecting policy-holders, IAISannounced in October 2013 its plan to develop International Capital Standards (ICS)by 2016. The ICS will be developed to apply to internationally active insurance groups(IAIGs) as part of the IAIS’ common framework for IAIGs’ supervision (ComFrame115).

Table 1: IAIS ComFrame and capital standards milestones 2013-2019

ComFrame and capital standards milestones 2013-2019

October - December2013 Public consultation on 2013 Draft ComFrame

Early – 2014

ComFrame Field Testing Phase begins Testing of Basic Capital Requirements (BCR) for Globally Systemically

Important Insurers (G-SIIs) begins Development begins on ICS

Late – 2014 BCR finalised and ready for implementation by G-SII jurisdictions Field testing of other elements of ComFrame

December 2014 Public consultation on ICS and HLA

2015 Higher Loss Absorbency (HLA) requirements for G-SIIs developed usingBCR as a base; to be finalised by end-2015

2015 – 2016 Testing of ICS and other elements of ComFrame Public consultation on ComFrame, including the ICS, in December 2015

End – 2016 Development of ICS complete

2017 – 2018 Testing and refinement of ICS and other elements of ComFrame Public consultation on ComFrame, including the ICS, in December 2017

End 2018 ComFrame, including final ICS, adopted by IAIS

2019 Implementation begins on ComFrame, including ICS HLA requirements for G-SIIs become effective

Source: IAIS, Annual Report 2013-2014, Figure 3. ComFrame and Capital Standards Milestones 2013-2019,p. 12.

Although this is a very ambitious project, IAIS has emphasised that it remains committedto the implementation of qualitative standards, especially as an important share ofMembers do not come from the developed world116.

The activities of the IAIS are visualised in figure 10. below:

114 IAIS Annual Report 2013-2014, p. 2. Article 2(a) By-Laws.115 See e.g. IAIS, Newsletters December 2014, p.4.116 See e.g. IAIS, Coordinated Implementation Framework, adopted on 16 October 2014; see also e.g. IAIS –

A2ii, Report of the 7th A2ii – IAIS Consultation Call IAIS and A2ii activities: opportunity to tell us what youneed! 20 November 2014, p. 2.


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Figure 10: Description of IAIS Activities

Source: IAIS Annual Report 2013-2014, IAIS By-Laws, ICODA European Affairs-Lowet analysis, March 2015.

3

Standard-se ng Implementa on Financial stability

Other material (reports, surveys, le ers ofresponse,…)

Applica on papers

Issues Papers

Guidance materia

Standards

Insurance Core Principle (ICP) Statements

Internal bodies involved:

• (Exceptional: General Meeting)• Executive Committee• Technical Committee• Technical Subcommittees and

joint Technical/Financial StabilitySubcommittee

Source: IAIS Annual Report 2013-2014


• Executive Committee• Implementation Committee• Implementation Subcommittees

Assesmentmethodology toiden fy G-SII

Annual assesment ofthe G-SII status of

insurers and reinsurers

Developing G-SII policymeasures for HLA

Guidance tosupervisors and firms

Coordina ng IAISac vi es with the FSBand the G20

Papers on issuesrelated to financialstability, systemic riskand macropruden alsurveillance


• Executive Committee• Financial Stability Committee• Financial Stability

Subcommittees and jointTechnical/Financial StabilitySubcommittees


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1.5.6. Process of development of materialThe process of production of material is as follows117:

Development of supervisory and supporting material

The relevant Parent Committee may obtain input from Members andstakeholders and approves and submits the project plan.

The Coordination Group makes a recommendation to the ExCo, which makes a finaldecision on the request.

The Subcommittee Chair and/or the Secretariat publishes a background notecovering the description of the project, identification of the reasons, the project’swork plan, timeline, opportunities for formal input and deliverables, provisionof the perspective on how the project fits into broader IAIS activities, specificquestions or topics for stakeholder comments, identification to whomstakeholders feedback may be submitted.

The Responsible Subcommittee(s) develops material pursuant to the project plan.

Consultation Procedure

The ExCo first approves the material for consultation.

Developed material is subject to at least one public consultation. Theconsultation period for supervisory material should in principle be at least 60 daysand for supporting material at least 30 days.

The Secretariat organises at least one public background session, conducted as aconference call (in all but exceptional circumstances), which is announced inadvance on the IAIS website.

The responsible Subcommittee prepares a summary of comments received andproposed responses thereto. Once approved by the relevant Parent Committee, thissummary shall be made available on the public website.

The Secretariat organises a public session on the comments and response,conducted as a conference call which is announced two weeks in advance on thewebsite.

If necessary, a subsequent public consultation is held, subject to the sameprocedure as the initial consultation.

Adoption and publication

The responsible Subcommittee sends the (eventually revised) paper, along with asummary of the outcome of the consultation process to the relevant ParentCommittee for final approval to send to the ExCo for adoption/referral to the GeneralMeeting.

At least 14 calendar days prior to the ExCo meeting for final adoption, thedraft is posted on IAIS’ public website for adoption or endorsement.

If the ExCo endorses the draft for submission to the General Meeting, the draft isposted on IAIS’ website at least 14 calendar days prior to the General Meeting.

117 IAIS, Policy for Consultation of Stakeholders.


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The final document as approved by the General Meeting is posted on IAIS’ website.N.B. Material adopted by ExCo is presented to the General Meeting for information.

1.6. Other relevant features and observations: the impact of theIAIS work on the shaping of EU law

1.6.1. How soft is soft law?The IAIS, which portraits itself as an international global standard setter118, has noregulatory power or legal authority: ‘Through the publication of principles, standards andguidance for implementing risk-based regulation, the IAIS is seeking the convergence ofsupervisory regimes around the globe.’ IAIS depends on its Members for theimplementation of its supervisory material such as standards and practices. In general,‘IAIS influences national and regional regulators by publishing supervisory principles,offering training and support, and advancing the latest developments in internationalregulation’119. But some IAIS Members also have sufficient national independence to beable to ‘transpose’ IAIS’ supervisory material into national rules via administrativeregulations without further parliamentary control – if they decide to do so.

Insurance supervisors’ IAIS membership does not create international legalobligations. According to Kal Raustiala and David Zaring, ‘Most importantly, the guidelinesand other documents (the TRNs) promulgate have no international legal status, meaningthat they do not create international legal obligations and do not require the samecumbersome domestic ratification procedures as treaties. Finally, the networks do notformally monitor the implementation of their decisions or provide dispute resolutionprocedures.’120 Although IAIS monitors implementation, it does not provide disputeresolution procedures.

Aware of these limitations, IAIS has developed a whole ‘arsenal’ of indirectmechanisms to stimulate Members into compliance. Members submit themselves toformal and informal control via several mechanisms of (soft) enforcement, developed bythe Implementation Committee and other implementation mechanisms, described below.

1.6.2. The IAIS By-LawsAccording to the IAIS By-Laws121, Members have a commitment to implement supervisorymaterial produced by IAIS. The IAIS By-Laws were recently changed122 in this regard; inOctober 2014, a new Article 6(6) was introduced:

‘Members commit to: (a) pursue the mission of the Association; (b) implement IAIS supervisorymaterial taking into account specific market circumstances; and (c) undergo periodic self-assessments and peer reviews.’

The IAIS is an Association according to the Swiss Civil Code, so it should be noted that suchcommitments would likely have to be ‘enforced’ in Switzerland against foreign supervisorswhich is rather unlikely; hence these ‘commitments’ can be considered merely or more asmoral obligations for IAIS Members. Members can lose their Membership when the General

118 See e.g. IAIS, Newsletter November 2014, p.1.119 See reference in Bismuth as well as in Bertezollo to: Center for European Policy and Research, International

Insurance Supervision/IAIS; also see NAIC, Topic on IAIS.120 Zaring at pp. 303 - 304 according to quote by Verdier, p. 118.121 Article 6(6) of the IAIS By-Laws.122 See new Article 6(b) of the IAIS By-Laws.


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Meeting deems that the continued status as Member is detrimental to the Association or‘any other ground that it deems fit, with or without disclosing the grounds of cancellation tothe entity’123. It is unclear whether this ever happened and on which grounds.

1.6.3. Self-Assessment and Peer Review (SAPR)The Self-Assessment and Peer Review (SAPR124) process is seen as a criticalcomponent for the implementation of ICPs. Its goal is to:

measure a jurisdiction’s level of observance;

identify the extent and nature of any gaps in an IAIS Members’ supervisory andregulatory framework;

develop regional benchmarks for participating jurisdictions;

create peer pressure among Members;

improve the understanding and observance of the ICPs.

The SAPR process, launched in 2011, is a voluntary self-assessment and peer review,led by the Standards Observance Subcommittee (SOSC), for detecting and monitoring the(non-) compliance of IAIS Members with the implementation of the ICPs125. These SAPRstake place on a thematic basis and will have covered all ICPs within a five-year timeframe. The results of the first SAPR exercise were published in 2013126. A second SAPRprocess was conducted in 2014127. Because it is a voluntary exercise, not all IAIS membersparticipate in SAPRs.

123 Article 8(6), (b) and (c) of the By-Laws.124 See IAIS Newsletter of March 2015; IAIS, Report from Expert Review Teams Conducting the Self-Assessment

and Peer Review of ICPs 1, 2 and 23; IAIS, Report from Expert Review Teams Conducting the Self-Assessmentand IAIS, Peer Review of ICPs 4, 5, 7 and 8; IAIS Coordinated Implementation Framework.

125 The IAIS Standards Observance Subcommittee (SOSC) was created in late 2010 to contribute to enhancedobservance of the revised ICPs. Specifically, the SOSC was mandated to develop assessment mechanisms andoversee the conduct of peer reviews. The SOSC subsequently designed a process for assessing the observancelevel of the ICPs, the Self-Assessment and Peer Review (SAPR). The IAIS then committed to undertake a SAPRon all ICPs, on a thematic basis, within a five-year period.

126 IAIS, Report from Expert Review Teams Conducting the Self-Assessment and Peer Review of ICPs 1, 2 and 23.127 IAIS, Report from Expert Review Teams Conducting the Self-Assessment and Peer Review of ICPs 4, 5, 7

and 8.


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Box 1: Excerpts from the Report from Expert Team Conducting the IAISSAPR of Insurance Core Principles (ICPs) nos. 4, 5, 7 and 8

A total of 69 authorities or 43 % of IAIS Members participated in the SAPR 2014.The participation rate was highest among supervisors from the FSB’s memberjurisdictions (18 or 75 %) with NAIC counted as one jurisdiction.

Among supervisors from jurisdictions that are members of the OECD,participation was 71 % (21 jurisdictions). Every IAIS region was represented.

The assessment questionnaire consisted of 82 questions covering 32 Standards intotal.

In general, observance of the ICPs and Standards is high (i.e. a large majority iseither observed or largely observed), however there are notable shortcomings.

In summary, some of the most common challenges to observance include:legislative frameworks that do not provide the powers needed to meet therequirements of the Standards; supervisory practices that are reactive and notsufficiently robust; supervisory concerns that are not resolved in a timely fashion,or to the satisfaction of the supervisor.

Source: www.iaisweb.org.

The SAPR is a desk-audit, conducted to assist jurisdictions in understanding whether theyobserve, largely observe, partly observe or do not observe the ICPs and the relatedindividual standards. The audit is carried out in the following manner:

The process begins with the development of a survey questionnaire by an externalexpert with extensive experience in conducting assessments on the ICPs.

The questionnaire is also reviewed by an Expert Team consisting of seniorsupervisors with subject matter expertise as well as experts from the WorldBank or the IMF.

The Member of IAIS assesses its own supervisory framework by filling in a survey.

Once the survey period is concluded, an Expert Team meets to review the results.

Each IAIS Member participating in the SAPR will receive a draft of the reportcontaining the Expert Team’s preliminary assessment of the overall observance ofeach of the standards being assessed.

Members can then provide comments and make corrections to these preliminaryassessments as necessary and the Expert Team considers all comments andcorrections before issuing final report.

While the individual Member (country) reports are confidential, an aggregate ICPreport, containing regional and global findings, is published on the website of the IAIS128.This aggregate ICP report can be used by the Member(s) to benchmark its/their progress.

The involvement of experts from the IMF and the World Bank results in a perception of theSAPR process as a complement of the Financial Sector Assessment Program (FSAP)which is carried out by the World Bank and the IMF, as having done a SAPR may reducesome of the work in the self-assessment stage of the FSAP of the respective IAIS Member.

128 IAIS, Other Supervisory Papers and Reports.


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The FSB recognised and endorsed the preliminary findings of the SAPR on ICP 1, 2 and 23in its 1 November 2012 Progress report to the G20 Ministers and Governors129, thusincreasing the weight of the SAPRs vis-à-vis those IAIS Members who are also member ofFSB. It has to be noted that the SAPR Expert Team recommended to make the SAPRparticipation an explicit condition to the IAIS membership130 in addition to the feedbackloop of the implementation framework as described in figure 11. below.

Figure 11: Implementation of IAIS Framework - Feedback Loop

Source: IAIS, Coordinated Implementation Framework, www.iaisweb.org, March 2015.

1.6.4. Integration of IAIS ICPs as part of FSAP ReviewsFSAPs131, performed for every jurisdiction by a different team of experts, consist of severalmodules, such as a Financial System Stability Assessment (FSSA, IMF), a Financial SystemDevelopment Assessment (FSDA, World Bank), and an Assessments of Compliance withInternational Financial Sector Standards (summarised in a Report on Observance ofStandards and Codes, ROSC). This last assessment is voluntary for the country, and canalso be conducted on a stand-alone basis without an ongoing FSAP.

129 FSB, Progress Report on Increasing the Intensity and Effectiveness of SIFI Supervision.130 IAIS, Report from Expert Review Teams Conducting the Self-Assessment and Peer Review of ICPs 4, 5, 7

and 8, p. 10.131 Established in 1999, FSAP reviews are ‘comprehensive and in-depth assessment of a country’s financial sector.

FSAPs analyse the resilience of the financial sector, the quality of the regulatory and supervisory framework,and the capacity to manage and resolve financial crises. Based on its findings, FSAPs producerecommendations of a micro- and macro-prudential nature, tailored to country-specific circumstances.’, seeIMF, Factsheet: Standards and Codes of the IMF.


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The standards most frequently assessed in the context of FSAPs are those on banking,capital markets, and insurance supervision. As the IAIS Insurance Core Principles(ICPs) are currently included in the IMF’s ‘List of Standards and Codes’132, theyconstitute the standards used by the IMF and the World Bank in the FSAPs133.

In September 2010, the Executive Board of the IMF mandated that the Financial SystemStability Assessment of the FSAP, which is usually voluntary for all Members, shouldbecome a regular and mandatory part of the IMF’s surveillance taking place everyfive year for Members with systemically important financial sectors under Article IVof the Fund’s Articles of Agreement. A total of 25 jurisdictions were identified as havingsystemically important financial sectors, based on a methodology that combines the sizeand interconnectedness of each country’s financial sector134. These are for the EU 11Member States (in alphabetical order): Austria, Belgium, France, Germany, Italy,Ireland, Luxembourg, the Netherlands, Spain, Sweden, the United Kingdom. Thecomplete group of 25 jurisdictions covers almost 90 % of the global financial system and80 % of global economic activity. It includes 15 of the G20 member countries, and amajority of members of the FSB which has been working with the IMF on monitoringcompliance with international banking standards. Countries may undergo more frequentFSSAs, if appropriate, on a voluntary basis135.

What does this mean for the EU? The IMF itself recognises clearly that its recommendationsare advisory:

‘How countries choose to address these recommendations is up to the authorities. Like all policyrecommendations made in the context of IMF surveillance, the FSAP recommendations are of anadvisory nature. Subsequent Article IV surveillance teams, as well as future FSAPs, are required toassess the extent to which these recommendations are being implemented and report to the IMFExecutive Board. Other international groupings or regional bodies may introduce monitoringprocesses that follow up on the implementation of FSAP recommendations or on actionstaken by the authorities to address shortcomings identified in the assessment of compliance withinternational standards during an FSAP (for example, the FSB’s peer review and Non-CooperatingJurisdictions processes). Such processes, however, are not part of the Fund’s policy framework orgovernance structure.’136

An analysis of compliance of IAIS’ ICPs shows that not all countries comply to the sameextent with these international insurance standards and principles (see Annex VII, KPMGOverview of FSAP Results as regards ICPs). But despite their advisory nature, despite thefact that not all countries comply, (and despite the fact that the FSAPs are especiallyrelevant for countries depending on IMF assistance), FSAPs are powerful tools for the EUand its Member States to induce countries to reflect on the status and health of thefinancial sector, even more so when there are systemically important financial institutionsestablished in the country concerned: FSAPs give policy action recommendations to acountry’s supervisors as well as to the legislators and regulators137. Especially for

132 For the list of the internationally recognised standards and codes which the IMF and the World Bank haveendorsed as important for their work in 12 areas, see IMF, Austria: Publication of Financial Sector AssessmentProgram Documentation – Technical Note on Insurance Sector. Information available following the FSAPdiscussions that ended on 30 April 2013.

133 See for example IMF, Denmark financial sector assessment program detailed assessment of observance of theinsurance core principles.

134 To be noted that this determination was reached by assessing the stability of the financial system as a wholeand not that of individual institutions.

135 IMF, Expanding Surveillance to Require Mandatory Financial Stability Assessments of Countries withSystemically Important Financial Sectors.

136 See IMF, FAQ.137 See for example for IMF, Germany: Financial Sector Stability Assessment, p. 7.


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supervisors, which have originated many of these standards, they are an importantbenchmark evaluation and a peer review138, see also Section 2.6.

138 It should be noted that in each EU Member State the check and balances between the supervisory authoritiesand the competent Ministry, usually the Ministry of Finance, are different; there are for instance MemberStates where supervisors prepare/draft the legislation.


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2. ACCOUNTABILITY OF IAIS AND COORDINATION;LEVEL, IMPACT AND ACCOUNTABILITY OF EUPARTICIPATION

KEY FINDINGS

Concerning the Commission’s competence to participate in IAIS activities, one canconclude that, as IAIS recommendations are not formally binding and because theCommission is entitled to conclude non-binding arrangements at any time, theCommission has the competence to participate in IAIS. Furthermore, EIOPA’scompetence is enshrined in its founding regulation. By agreeing as an ExCo Memberto IAIS standards, EIOPA does not create legal obligations for the Union.

EIOPA coordinates the positions of the Member States’ supervisory authorities. Thiscoordination (via three tools) is extensive and well structured, resulting in anincreased EU voice. The Commission participates partially in this coordination, itsmembership and presence in IAIS is important. Commission, EIOPA and MemberStates’ supervisory authorities mutually value each other’s presence andmembership and favour to maintain the status quo.

In terms of accountability, EIOPA has a general obligation to formally report back tothe Council and the European Parliament. The Commission is bound by its generalobligation to report to the European Parliament. There is hardly any IAIS-specificreporting, but both institutions declared to be available when requested.

No EU participant perceived any conflict of interests.

The EU representation in and contribution to IAIS is strong, and the different rolesare mutually beneficial. Currently, IAIS stands at a crossroad, with its main focus onthe development and implementation of ICS, which is not only a very ambitiousproject for IAIS, but equally important for the EU. Key concepts of the EU-originatedSolvency II framework found their way worldwide and into IAIS standards andprinciples, but a similar outcome in the area of ICS must be carefully crafted.Preconditions for a positive outcome are there. Given the fact that the ICPs are apart of the FSAPs, also the ICS, if and when ready, will find their way into theseassessments, thus maybe not requiring a hardening into EU law.

2.1. Legal basis of membership of EU participants in IAIS

2.1.1. CommissionSince the decisions of IAIS are not formally binding on its Members, and jurisdictionsare represented by their administrative authorities139, the legal basis of the observer statusof the Commission is neither covered by Article 220 or Article 221 of the Treaty on theFunctioning of the European Union (TFEU) on international organisations nor by the treaty-making rules of Article 218 TFEU140.

It is not explicitly mentioned which articles provide the legal basis for the Commission’srepresentation in formally non-binding financial ‘organisations’, such as the IAIS, contrary

139 Bertezollo, G., and Noël Fellow, E., p. 10; see also Zaring, D., cit. 301.140 ECJ, 233/02, France v. Commission, paragraph 45. Article 218 TFEU was previously Article 300 EC Treaty.


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to the well covered ‘key pillar’ organisations of global economic governance, such as theIMF and WTO141.

Following the parallelism doctrine, set out by the European Court of Justice142, theCommission finds its (non-exclusive) competence to participate in IAIS as a result of itsshared competence for internal market affairs, set out in Article 4(2)a) TFEU. According tothis doctrine, a close connection exists between the internal competences and the externalcompetences of the EU (‘in foro interno, in foro externo’). If the European Union hascompetence in a particular area internally, it could also conduct external relations in thatdomain143, provided that the external competence is necessary for the achievement of oneof the objectives of the Treaty144. This doctrine, based on jurisprudence, was later codifiedin Article 3(2) TFEU and Article 216 TFEU which state:

Article 3(2) TFEU: ‘The Union shall also have exclusive competence for the conclusion of aninternational agreement when its conclusion is provided for in a legislative act of the Unionor is necessary to enable the Union to exercise its internal competence, or in so far as itsconclusion may affect common rules or alter their scope.’

Article 216 TFEU: ‘1. The Union may conclude an agreement with one or more thirdcountries or international organisations where the Treaties so provide or where theconclusion of an agreement is necessary in order to achieve, within the framework of theUnion's policies, one of the objectives referred to in the Treaties, or is provided for in alegally binding Union act or is likely to affect common rules or alter their scope.’

Moreover, the Commission is always entitled to conclude non-bindingarrangements with third parties as long as it is clear in the text of the arrangement that itcannot be considered legally binding145. This is the case strictu sensu with the supervisorymaterial produced within IAIS, since it is an association; even if Article 6(6) of the IAIS By-Laws146 includes a non-binding commitment for Members. Therefore, the Commission canparticipate in IAIS activities without binding the Union.

2.1.2. EIOPAArticle 33 of the EIOPA-Regulation147 stipulates the contours of competence concerning theinternational relations of the Authority. EIOPA has, without prejudice to the competences ofMember States and the Union’s institutions, competence to develop contacts and enterinto ‘administrative arrangements with supervisory authorities, internationalorganisations and the administrations of third countries’. However, the agreements EIOPApossibly concludes cannot create legal obligations towards the EU and its MemberStates, nor can they prevent Member States and their competent authorities fromconcluding bilateral or multilateral arrangements with those third countries. Hence, EIOPAbeing an ExCo Member does not create legal obligations towards the Union.

141 Which find their basis in Article 220 TFEU and Article 221 TFEU, see Wouters, J. and Odermatt, J. InternationalBanking Standards, Private Law and the European Union, p. 11; and Wouters, J. and Odermatt, J., Comparingthe ‘Four Pillars’ of Global Economic Governance: A Critical Analysis of the Institutional Design of the FSB, IMF,World Bank and WTO, pp. 49-76.

142 ECJ, 3-4/76, 6/76, Kramer, 19-20; ECJ, 22/70, AETR, 14-16; ECJ, Opinion 1/76; ECJ Opinion 2/91; ECJOpinion 1/94.

143 Delreux, T., The EU as Environmental negotiator, p. 16.144 ECJ, Opinion 1/76, 3-5; ECJ, Opinion 1/94, 82; Delreux, T., The EU as Environmental negotiator, p 16.145 Ott, A., Vos, E., Coman-Kund, F., p. 18.146 Article 6(6) of the By-Laws, see also Section 1.6.1.147 Regulation (EU) no 1094/2010 establishing a European Supervisory Authority (European Insurance and

Occupational Pensions Authority).


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In a study on the Review of the New European System of Financial Supervision148 alsocovering EIOPA, the authors argue in relation to Article 33 of the EIOPA Regulation, thatthe membership of EIOPA in IAIS should not replace the NCA’s ‘notably because the day-to-day supervision is conducted by the NCAs.’ While this is true for the insurance sector, itcan be argued that the main reason is probably the fact that EIOPA cannot create legalobligations binding the EU and its Member States. In defence, however, and under thehypothesis that no legal obligations are created by the supervisory material of IAIS, themembership of EIOPA in IAIS can be considered to be ‘an administrative arrangement’.

2.2. Determination of positions of EU participants

2.2.1. EIOPASince the creation of EIOPA, the latter seems to be one of the main drivers determining aEuropean position:

‘Considering its responsibilities in the drafting of regulatory standards in the EU, EIOPA hasmaintained an active participation in relevant international organisations. The strengthening of therepresentation and visibility of Europe in such organisations, especially in the InternationalAssociation of Insurance Supervisors (IAIS), is paramount given the increased importance ofinternational standards.’149

EIOPA’s primary goal within IAIS is to coordinate the positions of Member States’supervisory authorities, thereby strengthening the voice of the EU. ‘One of EIOPA’smain priorities in the area of international organisations in 2013 was increasing the voice ofthe EU in international discussions. Significant progress was achieved in this area,culminating in the presentation of common EU positions on several of the main topics underdiscussion.’150. The Chairman of EIOPA stated in the European Parliament that the positionof EIOPA is ‘instrumental for creating a united front from European supervisors’151.

As mentioned in Section 1.5.1., EIOPA coordinates the ‘European seats’ in the IAIS ExCo,i.a. by discussing and deciding in EIOPA’s Board of Supervisors on the candidates for IAISCommittee Chair positions. In 2014 EIOPA also developed a leading role incoordinating a strong ‘European voice’ in Parent Committees with EIOPA participation152.Within EIOPA, the external relations team (part of the Policy Unit) covers all mattersrelated to the IAIS participation153.

EIOPA uses three tools for the coordination of Member States’ supervisors:

148 Demarigny et al., Review of the New European System of Financial Supervisions (ESFS), p. 46: ‘Whenconsidering the participation of the ESAs in international organisations, one of the key discussion points is howthe ESAs would operate compared to NCAs. A shared view is that the ESAs should not replace the NCAs withinsuch organisations, notably because the day-to-day supervision is conducted by the NCAs. So far, a preferredapproach is for ESAs to participate in those international organisations with a different membership status(with the exception of EIOPA that is a full member of IAIS) alongside the NCAs. There is no particular reasonfor the ESAs to have a different membership status. On the contrary, a participation of the ESAs, on an equalfooting, including within the key decision bodies of such international organisations, would reinforce theinfluence of the EU as a whole.’

149 EIOPA, Annual Report 2013, p. 60.150 EIOPA, Annual Report, 2013, p. 60.151 European Parliament, Economic and Monetary Affairs Committee, Hearing, 23 September 2014.152 Interview and e-mail exchange with EIOPA.153 Interview and e-mail exchange with EIOPA.


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High-level Strategy papers

EIOPA develops papers on strategic positions on selected IAIS topics. These are discussedand approved by its Board of Supervisors154.

International Relations Network (IRN)

The IRN is a network consisting of representatives of the 28 Member States. Main goal ofthis tool is to coordinate position papers and EIOPA’s draft responses. The IRN congregatesprincipally once a year but operates also on an ad hoc basis via telephone conferences andwritten procedures.

Preparatory telephone conferences

Before any IAIS Parent Committee meeting, EIOPA organises preparatory telephoneconferences in two ways:

A first telephone meeting is held on technical level;

A second one on a higher political level is held to align final positions for theTechnical Committee and the ExCo.

One can conclude that the EU coordination of positions is intensive, extensive and wellstructured. Although the procedures are not transparent to the general public, both EIOPAand the participating Member State supervisors are satisfied with the level of coordination.

2.2.2. The CommissionPrior to the creation of EIOPA, the Commission played a more substantive coordinatingrole. The Commission in general joins the ExCo meetings of IAIS as these are open to allIAIS Members. It also participates in the Technical Committee, the Financial StabilityCommittee and some of the Working Groups.

The Commission and EIOPA coordinate:

The Commission is a non-voting member of EIOPA’s Board of Supervisors. Itconsequently participates in the discussion of the High Level strategy papersat the BoS meetings at EIOPA.

The Commission does not participate in the IRN, this is reserved for EIOPA’smembers (supervisors).

The Commission does participate in the IAIS preparatory telephoneconferences organised by EIOPA.

The Commission represents the Union but without coordinating with the MemberStates.

Although the role of the Commission is less prominent than the role of EIOPA, allinterviewed EU Members of IAIS declared that the input of the Commission in IAISdiscussions (and therefore also in the coordination) is very valuable for the development ofthe material, and the shaping and balance of thoughts. If the EU Commission were to takeEIOPA’s role in IAIS, Members do not believe that the EU would gain further benefits. TheCommission’s membership and presence is important, both for the Member States asfor IAIS as organisation, due to at least four reasons:

154 For example, see EIOPA, Minutes of the BoS of 28-29 January 2015: ‘point 5: IAIS: ICS - high level strategicnote Decision by SMV’.


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Safeguarding the acquis communautaire;

Helping to shape the discussions of IAIS standards, taking into account the EUinterests;

Gaining a privileged insight about the developments within the worldwidesupervisory community, hereby giving it the possibility to anticipate on futuredevelopments on the global level;

Understanding potential needs for legislative action on an European level,hereby exercising a pioneering role for the spreading of IAIS standards and givingthe IAIS a robust status as global standard setting body.

2.2.3. Member StatesEvery IAIS Member with EU origin is a Member of IAIS as a national jurisdiction, andtherefore brings its own national opinion (except EIOPA and the EU Commission),notwithstanding EIOPA’s coordination mechanism. These different, yet coherent, EU voicesare considered to be a strength in the representation of the EU. Overall, there is strongsupport for maintaining the status quo.

2.3. Accountability and transparency

2.3.1. EIOPAAccording to Ott155, there are three categories of EU agencies, based on the formalpowers they have obtained, subjected to various degrees of supervision in a broad sense:

Agencies that need to ask prior approval by either Council or Commission for theconclusion of an act of international cooperation, such as EUROPOL - these arecategory 1 agencies;

Agencies that must ask for the opinion of the Commission prior to concluding an actof international cooperation, such as FRONTEX – these are category 2 agencies; and

Agencies ‘whose funding acts do not provide expressly for supervision by theCommission or the Council’ – these are category 3 agencies.

Ott classifies EIOPA, EBA, ESMA and the vast majority of agencies as category 3agencies: ‘Powers and/or obligations have been conferred upon category 3 agenciesinstead to cooperate with third countries and/or international organisations without furtherspecification of supervision.’

Based on Article 33 of the EIOPA Regulation, EIOPA, as a type 3 agency, does not require ascrutiny of the Commission or the Council. Article 33 of the EIOPA Regulation is comparableto several other articles for other agencies. Since EIOPA is a category 3 agency, it has nospecific obligation to formally report back to the Commission or the Council asregards its IAIS membership. However, EIOPA has a general formal accountabilityobligation towards the Parliament and the Council, laid down in Article 3 of the EIOPARegulation156.

155 Ott, A., Vos, E., Coman-Kund, F., EU Agencies and their international mandate: a new category of globalactors, p. 20.

156 EIOPA has no formal accountability towards the Commission (contrary to what is mentioned in point 23 of theIMF document EU: Publication of Financial Sector Assessment Program Documentation – Technical Note onEuropean Insurance and Occupational Pensions Authority Assessment).


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De facto, EIOPA formally reports once a year to the European Parliament in aParliamentary hearing157. In his statement before the Parliament’s ECONCommittee of 23 September 2014, the Chairman of EIOPA mentioned the activitiesundertaken in IAIS as follows: ‘Furthermore, we successfully coordinated thepositions of EU insurance supervisors in the context of the development of a BasicCapital Requirement by the International Association of Insurance Supervisors(IAIS)’. Apparently, EIOPA’s Chair submitted to the ECON Committee a few daysbefore the hearing information containing further explanations on these activities,although, concerning IAIS, this was basically a repetition of the oral statement as itdid not include a further description of the diversity of tools used to coordinate thepositions of the EU supervisors, or the degree of coordination with the Commission.It is also understood that the information neither included a description of othermatters than BCR handled within IAIS, nor the content of the coordinated positions.

However, the Chairman of EIOPA declared to be and has been available, atany time, formal or informally, when questions arise from European ParliamentMembers on all subject matters in relation to IAIS158.

Concerning the accountability towards the Council:

EIOPA works closely with the Council’s Economic and Financial Committee(EFC) ‘as an ad-hoc observer’159 to prepare the ECOFIN Council meetings.Further, EIOPA participates as a full participant at the Financial StabilityTable, which consists of the members of the EFC plus several non-EFCmembers, including representatives of the ESAs160;

EIOPA participates in meetings of the Financial Services Committee (FSC)as an observer;

EIOPA participates in meetings of the informal ECOFIN Council161.

Currently the points of view of EIOPA on IAIS matters are not displayed on theEIOPA website162. The tab ‘international relations’, ‘international organisations’ doesnot contain information on IAIS matters but only mentions: ‘EIOPA aims tostrengthen international supervisory coordination and supervisory convergence ofthe work of international bodies as well as to allow third countries that have adoptedand have been applying EU law to participate in the work of EIOPA’163. In EIOPA’sAnnual Report, the membership in IAIS Committees in which EIOPA participates ismentioned, as well as a short overview of the main topics. EIOPA gives no detaileddescription about attended meetings, positions taken or coordination procedureswithin IAIS164.

The minutes of the Management Board and the Board of Supervisors are publiclyavailable, progress on discussions can therefore be followed by the general public.

157 Interview EIOPA.158 Interview EIOPA.159 Interview EIOPA. No public information available about this ‘ad hoc observership’.160 EIOPA, Gabriel Bernardino attends the Financial Stability Table of the EFC-FST; Banque de France, Economic

and Financial Committee (EFC) of the European Union; Deutsche Bundesbank, EU Committees.161 Interview EIOPA.162 See for example NAIC, Committees.163 See EIOPA, International Organisations (situation as of 23 March 2015).164 EIOPA, Annual Report 2013.


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2.3.2. The CommissionThe Commission is bound to its general obligation to report to the EuropeanParliament, laid down in Article 249 TFEU.

However, the Annual Reports of the Commission’s (ex) DG Internal Market and Services165

do not mention the membership in IAIS, nor the fee it pays, nor the length or depth of thecommitment166. In the Annual Report of 2012, an overview is provided on theparticipation in the G20, the FSB and the WTO but IAIS is not mentioned. The report of2013 does not include a section ‘international relations’ and by consequence no referral ofthe progress made in IAIS. The Commission does not publish a full overview of theinternational organisations of which it is a Member167.

The Commission seems to have as only ‘reporting’ tool for the internationalinsurance issues the Minutes of the Expert Group on Banking, Payments andInsurance. This Expert Group, created in 2013, has an advisory role in certain financialmatters, and consists of national administrations and the Commission. Representatives ofthe European Parliament are invited to the meetings. Since its inception, the Commissionhas convened the insurance formation of the expert group five times168.

The Commission scheduled the agenda item ‘insurance international issues’,including equivalence-, EU-, US- and IAIS-issues, in the meeting of 1 July 2013where the Chair (Commission) emphasised the importance that the EU speaks withone voice in international meetings, followed by a brief substantial report about theprogress on IAIS matters.

The agenda of the meeting of 20 May 2014169 was mainly devoted to internationalinsurance issues, with interventions by stakeholders and an afternoon discussionsession. Unfortunately, the draft minutes of this meeting are (as of 25 March 2015)not yet published.

Neither the agenda, nor the minutes of the meeting of the Expert Group of 5 March2015, in which insurance issues were discussed, are published.

Currently no new meetings of the insurance part of the Expert Group on Banking,Payments and Insurance are scheduled170.

In reply to the questionnaire for this study, the Commission replied that it ‘reports to theParliament (both in advance and post factum)’. To provide a separate section in the AnnualReport would be ‘an option’, but it should be considered that the structure and content ofthe Annual Activity Report responds to a number of internal Commission guidelines.Further, thus the Commission expresses the opinion that

‘it would make more sense to report on international activities more in general, rather entering intoexcessive level of detail on activities related to each organisation’. ‘Reporting takes already place inspecific context, for instance when submitting a legislative proposal which makes a reference tostandards discussed at the international level, it includes the reasoning as to why such standards

165 Now DG FISMA.166 The Commission is IAIS Member since 1994, and reports to pay EUR 12,500.167 For example: EU Commission, Other Insurance Authorities/Organisations. The Commission does not make a

difference between organisation of which it is Member and of which it is not Member.168 1 July 2013; 28 January 2014; 26 March 2014; 20 May 2014 and 5 March 2015.169 EU Commission, Draft Agenda of the Expert Group on Banking, Payments and Insurance.170 See EU Commission, Expert Group on Banking, Payments and Insurance.


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were discussed and negotiated and what their objective is. The Commission also reports wheneverrequested by Council or Parliament.’171

It should be noted that no question from the European Parliament could be found in theParliamentary Questions database 2014-2019 on IAIS or on related matters172 but onoccasion letters are exchanged between the relevant Commission DG and the ECONCommittee.

2.4. Conflicts of interestIAIS has no formal procedure or policy for identifying and managing conflicts of interest.But since the discontinuation of the paid observership, the potential for conflict of interestshas been reduced. As noted by Bismuth, ‘the policy pursued by the IAIS makes theinvolvement of external actors in its consultation procedures dependent on an onerousobservership fee (…) thereby giving rise to the suspicion – legitimate or not – that thisfinancial dependence increases the risk of regulatory capture by private interests (…).’173

Both, ExCo members as well as former observers, stated clearly in the interviews not tosee a conflict of interest today.

2.5. Strengths, Weaknesses, Opportunities and ThreatsThe Union representation in IAIS is exercised via the Commission, EIOPA and the MemberStates. The analysis focuses therefore on the strengths, weaknesses, opportunities andthreats of that combined EU representation in IAIS.

The strengths of the EU representation in IAIS are:

a robust representation of the Union (the Commission, EIOPA and 26 of the28 Member States’ supervisors are IAIS Members);

the existence of workable and working coordination mechanisms between MemberStates’ supervisors, EIOPA and the Commission174;

the fact that each of the different EU representatives has good technical expertiseon prudential issues. This is underlined by the extensive participation of EUsupervisory authorities including EIOPA and the Commission, in IAIS working groupsand task forces175;

the willingness of the EU to invest adequate resources and knowledge to cope withthe challenges on a global level, reflected in important EU Membership of the ExCoand leadership of the Parent Committees ;

the fact that, in addition, nearly all EU Member States’ supervisors participate inIAIS, reflecting a large diversity of different roles and geographical coverage;

171 Commission’s reply to survey. On this last point, it can be added that Commissioner Lord Hill stated in in aletter to Roberto Gualtieri of 9 February 2015: ‘I’m happy to inform ECON committee about IAIS matters, bothin writing and orally, in as much detail as possible. I hope that the willingness of the Commission to liaiseclosely with the ECON Committee on international affairs in the area of financial services regulation wasdemonstrated by the appearance of Director General of DG FISMA, Jonathan Faull, before the Committee on2 December 2014. I have included a brief summary of recent IAIS developments below’.

172 See European Parliament, Parliamentary Questions, 2014-2019.173 Bismuth, R., The independence of Domestic Financial Regulators: an Underestimated Structural Issue in

International Financial Governance, p. 104-105.174 See 2.2. Determination of positions of EU participants.175 See 1.5.3. Working Groups and Task Forces.


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finally, the current broad coherence between IAIS-standards and EU law, especiallyon prudential issues176.

The weaknesses of the EU representation in IAIS are:

the effect of repetition and spill-over: although IAIS activities are non-binding, thereis the expectation of acceptance, reinforced towards every EU IAIS participant inevery interaction, in addition to the use of the ICPs by the FSAPs in every EU FSAP,although strictu sensu IAIS principles, standards and guidance do not legallyimpinge on the right of the respective legislator,

the need for prioritisation in terms of type of issues, as well as in terms of level ofinvolvement given the vastness of topics covered by IAIS. Despite the extensive EUparticipation, certain issues such as for example, conduct issues are not consideredto the same extent;

the fact that there is no coherent accountability of the representatives of the EU onEU level, in casu (the chairman of) EIOPA towards the Parliament and the Council177;and the Commission towards the public at large.

The opportunities of the EU representation in IAIS are:

the potential for a further continued coordination of the EU positions, although thereis already an extensive coordination of European positions;

the option to further provide an EU perspective into the shaping of international(capital) standards in coherence with EU law. This may take time but the fact thatthe Solvency II regime is soon being applied may underline this opportunity;

the shift of IAIS towards a larger, more diversified and accessible stakeholderparticipation: this shift will also create opportunities for the EU to receive input andcontributions from different types of stakeholders, including consumers;

the extensive EU participation in IAIS working groups which allows for a coherentdrafting of ICP’s and Standards by EU participants.

The threats for the EU representation in IAIS are:

a reduction of the robust and coordinated representation of the EU, e.g. due to thegrowth of other regional markets such as Asia, thereby reducing the proportion ofthe EU share in the ExCo; the cancellation of EU Member States’ supervisorsMembership of IAIS (cost cutting?); the potential of competence issues between thedifferent EU participants of IAIS (e.g. in case of an Insurance Union?);

strategic risks: the EU should be very careful not to overplay its cards. This mayinclude the reduction of the role of the EU as a thought leader, possibly forcing it tochange EU legislation in an unwanted direction;

the failure of IAIS to achieve an acceptable solution in the ICS debate, having asconsequence that IAIS does not fulfil the request of the FSB in this regard. This mayhave important consequences for the EU and its supervisory community, includingthe design of the supervisory landscape, given the influence of the central banks inthe FSB.

176 See 2.7. Qualitative evaluation on the influence the EU has on shaping international standards.177 See 2.3. Accountability and transparency.


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Possible approaches

The multiple membership of the EU participants has until now served the Union well. EachEU participant (Commission, Member States, EIOPA) has added value to the debate from adifferent angle. The fact that the Commission is an Associate Member has not hindered itsinfluence178. To have only EIOPA representing the EU, without the Commission, would notchange the picture as the Commission has no voting right in IAIS and cannot formally (helpto) define the strategic agenda which is set in the ExCo. The fee paid (EUR 16,200) is avery fair price for the right to sit at the table, to help shape - in Committees, WorkingGroups and Task Forces – IAIS’ supervisory material, to get insights in future developmentsin the insurance markets and to gain early understanding of potential regulatory trends.Furthermore, the EU insurance industry is more international than the insuranceindustry of any other geography, see figure 12. below.

Figure 12: Top 40 global (property and casualty (P&C)/non-life) insurancegroups according to region of headquarter, domestic versusinternational market, 2013

Note: % of gross premium written, 2012 data; Mitsui Sumitomo is based on MS&AD Group, Talanx, Hyundai–based on total business (Life, Non-Life and Reinsurance), Ace – GWP is based on total business (Life, Non-Life,Reinsurance), Samsung – GWP is for Samsung Fire and Marine, RBS – this is net number.Source: Annual reports, company filings, McKinsey ‘s Global Insurance Pools, ICODA European Affairs-Lowetanalysis, March 2015.

Because of all the above cited reasons, there is consequently no reason to change thestatus quo. In addition, compared with other TRNs, such as IOSCO where both theCommission and ESMA are not full, but associate members, or the BCBS were both theCommission and EBA are not members, but observers, the representation in IAIS forthe EU as a whole is more robust.

178 In the past, despite the non-voting membership, the presence of the EU Commission has been quiteinstrumental in advancing certain important key topics of the IAIS regulatory agenda: ‘Reportedly, theEuropean Commission’s representative sitting in the IAIS, who also followed the dossier on Solvency II in theEU, was very active in the IAIS’, see Quaglia, L., The sources of European Union influence in internationalfinancial regulatory fora, p. 335.


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2.6. Analysis of the possible linkages with Global EconomicGovernance

According to IAIS, ‘the IAIS coordinates its work with other international financialpolicymakers and associations of supervisors or regulators, and assists in shapingfinancial systems globally.

The IAIS itself is a member of:

The Financial Stability Board (FSB);

The Joint Forum, along with the Basel Committee on Banking Supervision (BCBS)and the International Organisation of Securities Commissions (IOSCO);

The IFRS Advisory Council of the International Accounting Standards Board(IASB).’179

IMF, OECD180 and the World Bank are all non-voting Members of IAIS. Vice versa IAIS alsoparticipates as an observer or partner in these organisations.

2.6.1. The link of IAIS with the FSBThe arrival of the FSB181, created in 2009 by the G20 Finance Ministers and Central BankGovernors in reaction to the 2008 global financial crisis, as a successor to the FinancialStability Forum (FSF), changed the ‘life of IAIS’, and with it the potential impact onits Members, including the European ones. Financial stability became a supplement toits core mandate182.

‘By forming the FSB, the G-20 deepened connections between the technocratic world of internationalfinancial regulators such as the Basel Committee and the political world of the finance ministers ofcountries that are Members of the G-20.’183

Indeed, because of the financial crisis, the FSB advanced a major program of financialregulatory reforms based on clear principles and timetables for implementation toaddress the shortcomings in the financial system exposed by the crisis. The FSB alsowanted to further globally-consistent rules and reach a level playing field across countriesand sectors. The FSB was tasked with providing recommendations and exploring how totreat global systemically important financial institutions (G-SIFIs) so as to prevent anotherfinancial crisis. G-SIFI’s would include Global Systemically Important Insurers (G-SIIs).

In July 2013, the FSB designated nine insurance group as G-SIIs, five of them based inEurope, three in the US and one in China184. In October 2013, ‘IAIS at the direction of theFSB, announced plans to pursue development of a comprehensive supervisory andregulatory framework’, including straightforward, basic capital requirements (BCR)and higher loss absorbency (HLA) requirements for G-SIIs185. This included thedevelopment and publication of a methodology for G-SIIs, and a set of policy measures

179 IAIS, Annual Report 2013-2014, p. 2 - 3.180 An example of link is for instance the Market Conduct Working Group which also monitored developments and

contributed to the work of other organisations in the area of consumer protection, which included participatingin the OECD’s Task Force on Financial Consumer Protection, IAIS Annual Report, 2014, p. 15.

181 The G20 Finance Ministers and Central Bank Governors created the Financial Stability Board (FSB) in 2009.182 IAIS, Annual Report 2008-2009, p.1.183 Lyngen, N. & Simmons, C., The Financial Stability Board: The New Face of International Financial Regulation.184 FSB, Global systemically important insurers (G-SIIs) and the policy measures that will apply to them, 18 July

2013.185 NAIC, Financial Stability Board, 2015.


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that will apply to them186. FSB also directed IAIS to develop a risk-based globalinsurance capital standard (ICS) for internationally active insurance group, a taskIAIS incorporated in the ComFrame supervisory framework, which was already formallyunderway since 2010187. As a result,

‘IAIS has committed to develop three separate global quantitative insurance standards by2019: (1) a risk based global insurance capital standard (ICS) for internationally active insurancegroups (IAIGs); (2) straightforward, backstop capital requirements (BCRs) for global systemicallyimportant insurers (G-SIIs); and (3) Higher Loss Absorbency (HLA) capacity for G-SIIs.’188

Consequently, the FSB, and its increasing demands, obliged IAIS to embark on a new‘S-curve’189 (see figure 13. below) essentially moving from the first S-curve, thedevelopment of insurance core principles (ICPs), towards the second S-curve, thedevelopment of (for the first time global) insurance capital standards (ICS), thereby:

bringing IAIS much more into the international spotlights;

resulting in more tailor-made standards for IAIGs through ComFrame;

expanding ICPs and building on them: ComFrame and G-SII policy measures areadding specific quantitative material, complementing the existing and newqualitative materials190.

In the area of the ICPs, implementation continues to receive major attention.

186 The FSB consulted with IAIS and national authorities and decided to designate for 2014 the nine G-SIIsalready identified in 2013 and to postpone a decision on the G-SII status of reinsurers, pending furtherdevelopment of the methodology. By November 2015, IAIS will further develop the G-SII assessmentmethodology as it needed to ensure, among other things, that it appropriately addresses all types of insuranceand reinsurance, and other financial activities of global insurers. The revised G-SII assessment methodologywill be applied as of 2016; see FSB, FSB Publishes the 2014 update of the F-SII List, 2014; and NAIC, FinancialStability Board, 2015.

187 IAIS Press release of 9 October 2013: ‘The International Association of Insurance Supervisors (IAIS) todayannounced its plan to develop a risk based global insurance capital standard (ICS) by 2016. Fullimplementation will begin in 2019 after two years of testing and refinement with supervisors andinternationally active insurance groups (IAIGs). In 2010, the IAIS began developing a comprehensiveframework for the supervision of IAIGs, or ComFrame. The IAIS has now agreed to develop a risk based globalICS and to include it within ComFrame, which has always included a capital component within its solvencyassessment. This component, which is being finalised in concept, will be used as a starting point fordevelopment of the ICS. This commitment follows the IAIS’ announcement in July that it considers a soundcapital and supervisory framework for the insurance sector essential for supporting financial stability andprotecting policyholders.’; see also previous footnote.

188 IAIS, Newsletter, October 2013, p. 1.189 The concept S-curve is mostly used to describe development patterns, as well for products and services as for

organisations. It usually has three stages: 1. development or formation phase where the changes are slow(lower part of the S may be rather flat), 2. take-up phase where there is rapid development (the steep part ofthe S), and 3. the maturity phase where growth is flat again; see for example Nunes, P., and Breen, T.,Jumping the S-Curve.

190 It should be noted that a field testing taskforce for ComFrame was created in 2013 (different to the solo ICPs),implying potentially a different nature of the ‘supervisory material’; see also interview with ExCo members.


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Figure 13: IAIS - S-curve 1 and S-curve 2, level of achievement, 1997-2019

Source: IAIS Annual reports, Newsletters, interviews, ICODA European Affairs-Lowet analysis March 2015.

This implies that IAIS is now considering to deliver ‘supervisory material’ for a three-tierinsurance market: solo insurers (including non-internationally active insurance groups; themajority of the market), internationally active insurance groups, and systemically importantinsurance groups (currently less than ten groups worldwide). IAIS recognised this newchallenge and adopted therefore a new five year strategic plan (IAIS Mission and 2015-19Strategic Goals):

‘The IAIS’ role within the international financial community has increased substantially over the lastseveral years. As a result the IAIS has taken on additional responsibilities, such as assisting in thedesignation of the G-SII’s and developing global Insurance Capital Standards. These activities werenot contemplated in 2010 when the 2011-15 Strategic Plan and Financial Outlook was adopted.Accordingly in 2013 the IAIS began a review of its strategic goals, financial outlook and resources’191.

Therefore, one can argue that IAIS stands at a crossroad and is emerging from anorganisation that was initially focused on supervisory cooperation and information exchangeinto a globally respected standard setter with a new ambitious additional focus.Although IAIS is independent from the FSB, the links between the FSB and IAIS aremanifold:

The IAIS is a member of the FSB;

There are frequent interactions between the FSB and the IAIS; e.g. a member of theSecretariat of the FSB is attending the IAIS Financial Stability Committee, and thereare regular exchanges and reporting192;

It cannot be stressed enough that, despite the fact that the FSB has been created by theG20 Finance ministers, the actions taken by the FSB are advisory only and they arenon-binding: ‘Instead the organisation operates by moral suasion and peer pressure,

191 IAIS, Annual Report 2013-14, p. 4.192 Interview ExCo members.


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in order to set internationally agreed policies and minimum standards that its Memberscommit to implementing at national level.’193

To achieve this result, the FSB uses two ‘adherence to international standards’mechanisms:

Member countries agree to undergo periodic peer reviews: the FSB established aregular program of country and thematic peer reviews of its member jurisdictions;FSB jurisdictions undergo an FSB peer review 2-3 years following an FSAP194.

Participation in the IMF/World Bank public Financial Sector Assessment Program(FSAP).

Table 2: Participation in the Financial Sector Assessment Program (FSAP) forFSB-EU Member Jurisdiction

FSBJurisdiction

Latest FSAPcompleted

Reports published Ongoing andfuture FSAPsFSSA BCPs ICPs IOSCO

France Dec. 2012 yes yes yes yes 2017

Germany July 2011 yes yes yes yes 2016

Italy Sept. 2013 yes yes yes yes 2018

Netherlands June 2011 yes yes yes yes 2015

Spain June 2012 yes yes yes yes 2017

UnitedKingdom August 2011 yes yes yes yes 2016

EuropeanUnion March 2013 yes n/a n/a n/a

Source: FSB, Country Peer Review Schedule, 11 November 2014.

‘The FSB has no power to enforce its recommendations. Instead, it relies on its peer review process,“naming and shaming” states that do not comply with its suggestions, Herring explains. FSBMember States are expected to lead by example, according to the FSB’s website. For example, theymust publish IMF and World Bank reviews of their implementation of best practices, even thoughnon-FSB countries need not make these reports on their compliance public. One of the main goals ofthe FSB’s monitoring activity is to facilitate transparency through this public process, according toGadinis. Even with these requirements, though, Herring cautions that “a lot of countries will agree toeverything and enforce nothing.” Gadinis is also leery—while he praises the FSB’s transparency, henotes that “when we have another crisis, we will see how the systems we have put in place actuallyoperate.”’195

In this context, it should be noted that only six Member States and the EU (ECB andEuropean Commission) are FSB members.

2.6.2. Link with the IMFThe FSAP, conducted by the IMF and the World Bank, uses the supervisorymaterial of IAIS (see Section 1.6.1). For IAIS, this support of the IMF and the World Bankis ‘critically important’ as they are implementation partners : ‘It is critical that the IAISmaximize its close connection with the WB and IMF to both strengthen our understanding

193 FSB, About.194 FSB, Peer Reviews; FSB, Country Peer review Schedule.195 Lyngen, N. & Simmons, C., p. 7.


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of implementation challenges that exist, but to also maximize the range of support that isavailable to IAIS Members through jurisdiction level technical assistance and throughsupport for global IAIS implementation activities.’196

Although the FSAPs have an advisory nature, they receive high political attention asevery FSAP is (highly) debated in each country assessed before being publicly released.Each report contains a table featuring key recommendations, these are rated according topriority and time-frame for implementation. Countries are free to implement theserecommendations, but the IMF follows up and monitors countries’implementation197.

The FSAP of the EU of February 2013 stated that the implementation delay in Solvency IIimplied that ‘important aspects of supervision, including valuation, disclosure and riskmanagement would remain non-compliant with the International Association of InsuranceSupervisors (IAIS) principles (see national FSAPs) in several EU Member States, preventingthe urgently needed proper assessment of the risks in this sector in the present low interestrate environment’198. A technical note assessing EIOPA, and forming part of the FSAP of theEU, stated in March 2013 that ‘several EU Member States will remain not compliant withthe IAIS principles (as evidenced by recent FSAPs) in the absence of SII’199.

As mentioned in Section 1.6.1., the FSAPs are especially important and relevant forthe supervisory authorities as they benchmark their work and activities againstsupervisory principles (and therefore also against their peers)200. They show the margin forimprovement, either via execution or regulation or legislation, as these benchmarksreveal not only that not all jurisdictions comply to the same extent, but also thatsometimes improvements are only possible via the legislative way; see Annex VII forKPMG’s Overview of FSAP results regarding ICPs.

2.6.3. Leeway for the legislator?This non-binding nature of the ICPs and other ‘activities’ of IAIS, also those related to thedevelopments at the request of the FSB, do not legally impinge on the right of thelegislator. But there is the effect of repetition and the risk that the mere use of the ICPsin the FSAPs is a proof of their acceptance.

Surveying the Commission as well as the national Ministries of Finance or other equivalentcompetent ministries of Member States, the study found divergent views regarding thepotential to affect the ability of the EU or Member States to independently shape theirown policy. The Commission clearly considers the ICPs as recommendations, whereassome Member States are less positive on the remaining national freedom, considering whathappened on the banking side. However, a content similar to Solvency II may gild the pill.

According to the Commission, ‘IAIS standards and guidelines are recommendations tojurisdictions which can decide whether or not to incorporate them into their legislation. IAISMembers are not executives nor legislatures of their jurisdictions, and adoption by IAISof a measure is not binding on an executive or legislature of a jurisdiction.’ This

196 See IAIS, Coordinated Implementation Framework (CIF).197 IMF, FSAP: Big and Small Financial Systems in Spotlight in 2013.198 IMF, EU: Publication of Financial Sector Assessment Program Documentation – Technical Note on European

Insurance and Occupational Pensions Authority Assessment, p 24.199 IMF, EU: Publication of Financial Sector Assessment Program Documentation – Technical Note on European

Insurance and Occupational Pensions Authority Assessment, p 29; this comment may lead to the interpretationthat Solvency II is a regional application of worldwide IAIS standards and guidance.

200 For the Commission as regulator, the impact is different, and hence the Commission considers FSAPs as ‘Veryuseful information as far as insurance is concerned’; source: Commission’s reply to survey.


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underlines the right of initiative of the Commission, including the right, in due course, topropose standards to be applied – or not applied - to G-SII, or to IAIG’s, or to any other(solo) insurer201.

According to Member States, the perceptions are more mitigated:

Spain

According to the Spanish Ministry of Finance: ‘Different organizations at politicallevel (G20- FSB,…) have committed IAIS with developing international standards.Obviously, for this standards to be international (this) will require implementation ata global scale. This means that they will have an effect on the ability of the EUand MS to independently shape our own policy. The potential situation (toeffect this ability) would not be new. If we look to the banking sector, for instance,Basel Accords already have a clear effect at this regard.’202

Slovak Republic

Also the Slovak Republic is concerned ‘regarding the particular activities of IAIS,mainly those, which tend to have impacts on Member States national legislation. Inour view, IAIS is based on voluntary membership and its recommendations shouldbe addressed to its Members, i.e. supervisory authorities. Having said that, we donot support current tensions that outcomes of IAIS works such asstandards or guidelines have direct impact on Member States legal systems.We do not see the legal basis for such an approach whereas legislative power isstrictly in competence of the National Parliaments of Member States.’203

Sweden

‘The effect will depend on whether the standards and policies are compatiblewith the underlying principles in the Solvency 2 directive, that is the riskbased approach, the market valuation approach and the full balance sheet approachin combination with qualitative measures on risk management and governance. Thiswill also depend on the scope of application of the measures and the binding natureof them.’204

Lithuania

‘International standards and policy guidelines are extremely relevant forindividual regime when it comes to international, cross-border business.And since financial sector is regulated at EU level, comparable and compatiblestandards are welcomed.’205

201 Commission’s reply to survey. See also the letter of Commissioner Lord Hill to ECON chair Robert Gualtieri of9 February 2015: ‘ The Commission has pointed out many times in both the IAIS and the FSB that anyinternational agreements on global capital standards for insurers (sic) could be implemented in the EU only viaan EU-level legislative proposal adopted by the co-legislators; the Commission has refrained in those bodiesfrom making any firm commitments on behalf of the EU as a whole, and it has consistently stated that itspositions are without prejudice to the future decisions of the co-legislators.’

202 Response of the Spanish Ministry of Finance on a Survey sent in March 2015 to a large number of EU MemberStates (Members of IAIS) in which the following questions were asked: How do you perceive the participationof the EU in IAIS? How would you like it to evolve in the future? Can the participation be enhanced? Do youthink that the activities of IAIS, leading to international standards and policy guidelines, have an effect on theability of the EU or the Member States to independently shape its/their own policy?

203 Response of the Ministry of Finance of the Slovak Republic on a Survey, sent to all EU Member States, Memberof IAIS.

204 Response of the Swedish Ministry of Finance on a Survey, sent to all EU Member States, Member of IAIS.205 Response of the Lithuanian Ministry of Finance on a Survey, sent to all EU Member States, Member of IAIS.


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2.7. Qualitative evaluation of the influence the EU has on shapinginternational standards

Given that in insurance there are no (worldwide) quantitative standards yet - beyond theICPs and the BCR as already adopted (applies to G-SIIs only) - the European Solvency IIframework is, according to interviews, ‘basically setting the scene in this area’206. This isconfirmed by academic literature: according to Quaglia, ‘When EU regulatory capacity isweak, and international regulatory capacity is strong, one would expect that EU will mainlydownload international rules within its borders [...]. When the EU regulatory capacity isstrong, and international regulatory capacity is weak, one would expect the EU to upload orcross load its rules, with the convergence taking place towards EU rules, or the lack ofinternational convergence (if the US strongly opposes it)’207.

In a more recent article, Quaglia extensively explains how ‘remarkable’ it is ‘that key topicsof the IAIS regulatory agenda from the mid-2000s onwards – namely ‘enterprise riskmanagement’, ‘structure of regulatory capital’; ‘use of internal models’; ‘group supervision’;‘mutual recognition of supervisory regimes’ – very much reflected EU priorities andperspectives [...], not the US regulatory model. Key concepts of the Solvency II approach[...] found their way into IAIS standards and guidelines. [...] In this case, unlike in BaselIII, the EU had a relatively high influence on international standard setting in insurance, ascompared to the US [...]. The EU (to be precise, the Commission and the EU MemberStates in the IAIS) presented a rather cohesive position based on the (then newly agreed)EU solvency rules’208.

She explains the potential to influence the shape of international standards based on threeindependent and two dependent variables: the cohesiveness of the EU position, the EUmarket size, and the EU regulatory capacity, all independent variables, played in favour ofthe EU. In addition, the EU influence was high and the US preferences different. As a result,Solvency II is ‘basically setting the scene’.

206 Interview EIOPA.207 Quaglia, L., The European Union in regulating global finance, p. 15.208 Quaglia, L., The sources of European Union Influence in International Financial Regulatory Fora, 2014.


PE 542.19756

Table 3: An Overview of EU-US Influence in BCBS, IAIS and IOSCO

International standardsand standard setting

bodies

BCBSBasel III(2010)

IAISSolvency

standards (2011)

IOSCO Hedgefund principles

(2011)

Independent variable 1:Cohesiveness of EU position

No Yes Yes, but only onprinciples

Independent variable 2:EU market size

EU>US EU=US EU<US

Independent variable 3:EU regulatory capacity

EU rules and USrules unfit for

purpose

EU state of the artrules, outdated US

rules

EU and US rules inthe making (at that

time)

Dependent variable:EU influence

Relatively low,but EU MemberStates' influence

Relatively high Intermediate, onprinciples rather than

content

External variable:Preferences US

Different fromEU/European

Member States

Different fromEU/European

Member States

Some agreement EU-US on principles, but

differences on content

Source: Quaglia, L., The sources of European Union Influence in International Financial Regulatory Fora, 2014.

In addition, the EU Solvency II framework is used by the World Bank as part of its toolbox,when helping jurisdictions across the world to improve their insurance and supervisoryframework: ‘The World Bank Group is supporting developing countries and emergingmarkets to develop roadmaps towards risk-based supervision using Solvency II approach’:examples given included Argentina, Jordan, Thailand, Turkey209. Besides the toolbox of theWorld Bank, other jurisdictions, such as Mexico210, have also introduced frameworks similarto Solvency II.

209 Noel, M., World Bank Group, Fit for Global Thinking, The World Bank Approach, pp. 4-7.210 Aguilera-Verduzco, M., CNSF-MEXICO, Implementing A New Solvency Regime: The Mexican Experience,

pp. 9 - 17.


PE 542.197 57

3. EVALUATION OF CONFORMITY WITH ILAACCOUNTABILITY RECOMMENDED RULES ANDPRACTICES

A brief evaluation of IAIS according to the first part of the ILA Accountability RecommendedRules and Practices (RRP’s)211 covering the accountability of International Organisations,reveals that IAIS meets most criteria set up by the ILA Accountability Framework.

In this evaluation, eight (of ILA’s nine) principles were assessed:

good governance;

good faith;

constitutionality and institutional balance;

stating the reasons for decisions or a particular course of action;

procedural regularity;

supervision and control;212

objectivity and impartiality;

due diligence; and

the relationship with NGO’s.

It should however be noted that IAIS is not an international organisation, established by atreaty. Therefore, some RRPs are not applicable, and some are not appropriate for aninternational association whose members are not treaty countries.

Nevertheless, our evaluation, which we cross-checked with IAIS, leads to the conclusionthat IAIS meets 37 of the 41 applicable criteria. Only in terms of transparency, someimprovement could be made.

Concerning the need for improvement regarding transparency, we would like to underlinethat IAIS neither adopts standards in public votes nor allows for public participation in(non-)plenary meetings. Nevertheless, all IAIS standards, guidance and good practices aresubject to public consultations. The standard setting documents are adopted by theMembers of the ExCo, which is open to all IAIS Members (but not to the general public).The final version of supervisory documents scheduled for adoption is also made publiclyavailable at least 14 days before adoption.

Furthermore, IAIS adheres to the ILA standards of accountability and has an appropriatelevel of conduct according to the evaluated principles.

For a full overview of the ILA Recommended Rules and Practices and the evaluation seeAnnex VIII.

211 ILA, Final Report of the ILA Berlin Conference: Accountability of International Organisations.212 This principle is not applicable to IAIS since no subsidiary organs are present in the organisation.


PE 542.19758

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PE 542.197 59

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PE 542.19760

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PE 542.19764

ANNEX I: List of Interviews / Survey

Organisation Name, Position Interview/Survey

For IAIS Hufeld, Felix, Germany, IAIS Chairman, BaFin PresidentDG FISMA, EU Commission Survey

For IAIS Van Hulle Karel, Former IAIS EU Commission'srepresentative Interview

For IAIS, ExCo

Braumüller, Peter, Austria, IAIS, Former IAIS Chair, Chairof the Budget Committee, ExCo non-voting Member;Managing Director at Finanzmarktaufsicht (FMA), Austria,in charge of supervision of insurance companies andpension funds

Corinti, Alberto, Italy, IAIS, Chair of the Financial StabilityCommittee, ExCo non-voting Member; IVASS (Istituto perla vigilanza sulle assicurazioni), Italy, Member of theBoard of Directors

Jaworski, Damian, Poland, IAIS, ExCo voting Member;KNF-Polish Financial Supervision Authority, Poland,Director Analyses and International CooperationDepartment

Lemery, Sandrine, France, represented by Quintart,Nathalie, Head of Insurance International Division andRichard Philippe, Director International Affaires

Bernardino, Gabriel, EIOPA, President; Rosenbaum,Susanne, Special Counselor to the President; Coucke,Catharine, Legal Counselor; Arnoldi, Gabriele,International Relations

Saporta, Victoria, UK, PRA, Head of Prudential PolicyDivision

Interview

IAIS,Observer

Insurance Europe: Koller, Michaela, Director General;Vidonja, William, Head of Conduct of Business; Armesto,Rosa, Head of Public Affairs; Jones, Olav, Deputy DirectorGeneral & Director Economy/Finance; Mihai, Cristina, Headof International Affairs

Interview

IAIS,Observer AMICE: Pozniak, Gregor, Secretary-General Interview

EU MemberState Lithuania, Ministry of Finance Survey

EU MemberState Sweden, Ministry of Finance Survey

EU MemberState Spain, Ministry of Finance Survey

EU MemberState Slovak Republic, Ministry of Finance Survey


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ANNEX II: IAIS MembersNote: IAIS, Homepage. However, based on our own calculations, the precise amounts are thefollowing: 146 countries, encompassing 190 jurisdictions. The difference between countries andjurisdictions is due to:a) the EU (27 ‘jurisdictions’ are Members, i.e. 26 Member States plus the EU/EIOPA; Croatia andGreece are not IAIS Members, but could be regarded as being represented via EIOPA);b) the US (1 country, 57 jurisdictions, i.e. 56 States plus Federal Jurisdiction), andc) CIMA (14 countries, 1 jurisdiction).The difference between Members and countries is due to the correction for- double memberships per country,- international organisations, and- the EU (33 Members, 28 countries, 32 votes, 27 jurisdictions),- the US (3 Members, one country, 17 votes), and- CIMA (1 member, 14 countries); see IAIS, 2015 Annual Member Fees.

EU Members

Jurisdiction Organisation No. ofvotes

No. ofcountries

No. of Ju-risdictions

1 Austria FMA Österreich 1 1 1

2 Belgium FSMA 1 1 1

3 Belgium Nationale Bank 1 sec sec

4 Bulgaria Financial Supervision Commission 1 1 1

5 Cyprus Ministry of Finance 1 1 1

6 Czech Republic Czech National Bank 1 1 1

7 Denmark Finanstilsynet 1 1 1

8 Estonia Finansinspektioon 1 1 1

9 EU EIOPA 1 28 1

10 EU European Commission 0 sec sec

11 Finland Financial Supervisory Authority 1 1 1

12 Finland Ministry of social affairs and health 1 sec sec

13 France ACPR 1 1 1

14 Germany BaFin 1 1 1

15 Germany Federal Minister of Finance 1 sec sec

16 Hungary Central Bank of Hungary 1 1 1

17 Ireland Central Bank of Ireland 1 1 1

18 Italy Istituto per la Vigilanza sulle Assicurazioni 1 1 1

19 Latvia FKTK 1 1 1

20 Lithuania DPK 1 1 1

21 Luxembourg Commissariat aux Assurances 1 1 1

22 Malta Malta Financial Services Authority 1 1 1

23 Netherlands AFM 1 1 1

24 Netherlands De Nederlandsche Bank 1 sec sec

25 Poland Polish Financial Supervision Authority 1 1 1

26Portugal Autoridade de Supervisao de Seguros e Fundos

de Pensoes1 1 1

27 Romania Autoritatia de Supraveghere Financiara 1 1 1

28 Slovenia Insurance Supervision Agency 1 1 1

29 Spain Direccion General de Seguros y Fondos dePensiones

1 1 1

30 Sweden Finansinspektionen 1 1 1

31 The Slovak Republic Narodna Banka Slovenska 1 1 1

32 United Kingdom Bank of England 1 1 1

33 United Kingdom Financial Conduct Authority 1 sec sec


PE 542.19766


No. ofcountries


Non –EU

Members

EU Members

34 Albania AMF Albania 1 1 1

35 Iceland The Financial Supervisory Authority 1 1 1

36 Macedonia 1 1 1

37 Montenegro 1 1 1

38 Serbia 1 1 1

39Turkey Turkey Prime Minister - Undersecretariat of

Treasury1 1 1

40 Argentina 1 1 1

41 Armenia 1 1 1

42 Aruba Centrale Bank van Aruba 1 1 1

43 Australia Australian Prudential Regulation Authority(APRA)

1 1 1

44 Australia NSW 1 sec sec

45 Australia PHIAC 1 sec sec

46 Azerbaijan 1 1 1

47 Bahamas 1 1 1

48 Bahrein BMA 1 1 1

49 Bangladesh 1 1 1

50 Barbados 1 1 1

51 Belarus 1 1 1

52 Belize 1 1 1

53 Bermuda BMA 1 1 1

54 Bhutan 1 1 1

55 Botswana 1 1 1

56 Brazil ANS 1 1 1

57 Brazil SUSEP 1 1 1

58 British Virgin Islands FSC 1 1 1

59 Brunei Darussalam 1 1 1

60 Burundi 1 1 1

61 Cambodia 1 1 1

62 Canada Autorité des marchés financiers 1 1 1

63 Canada FICOM 1 Sec sec

64 Canada OSFI 1 Sec sec

65 Cape Verde 1 1 1

66 Cayman Islands Monetary Authority 1 1 1

67 Chile SVS Principal 1 1 1

68 China China Insurance Regulatory Commission 1 1 1

69 Chinese Taipei 1 1 1

70 Colombia 1 1 1

71 Costa Rica 1 1 1

72 Curaçao & Sint Maarten 1 1 1

73 Ecuador SBS Superintendencia de bancos y seguros 1 1 1

74 Egypt EISA 1 1 1

75 El Salvador SSF 1 1 1

76 Ghana 1 1 1

77 Gibraltar FSC 1 1 1

78 Guatemala Superintendencia de Bancos de Guatemala 1 1 1

79 Guernsey Guernsey Financial Service Commission 1 1 1

80 Guinea 1 1 1

81 Hong Kong Commissioner of Insurance 1 1 1


PE 542.197 67


No. ofcountries


82 India Insurance Regulatory and DevelopmentAuthority of India

1 1 1

83 Indonesia 1 1 1

84 Isle of Man Isle of Man Government 1 1 1

85 Israel Ministry of Finance 1 1 1

86 Jamaica Financial Services Commission 1 1 1

87 Japan Financial Services Agency 1 1 1

88 Jersey Jersey Financial Services Commission 1 1 1

89 Jordan IRC 1 1 1

90 Kazakhstan National Bank of Kazakhstan 1 1 1

91 Kenya 1 1 1

92 Kosovo Central Bank of Kosovo 1 1 1

93 Lebanon 1 1 1

94 Lesotho 1 1 1

95 Liechtenstein 1 1 1

96 Macau Monetary Authority of Macao 1 1 1

97 Malawi 1 1 1

98 Malaysia Central Bank of Malaysia 1 1 1

99 Malaysia International Business and Finance Center,Malaysia

1 sec sec

100 Mauritius 1 1 1

101 Mexico CNSF - Comision National de Seguros y Fianzas 1 1 1

102 Moldova 1 1 1103 Mongolia 1 1 1104 Morocco 1 1 1

105 Namibia Namibia Financial Institutions SupervisoryAuthority

1 1 1

106 Nepal 1 1 1

107 New Zealand 1 1 1

108 Nigeria National Insurance Commission 1 1 1

109 Norway Financial Supervisory Authority of Norway 1 1 1

110 Pakistan Securities and Exchange Commission of Pakistan 1 1 1

111 Palestina Palestine Capital Market Authority 1 1 1112 Panama 1 1 1113 Papua New Guinea Bank of Papua New Guinea 1 1 1114 Papua New Guinea Department of Finance Treasury 1 sec sec115 Paraguay 1 1 1116 Peru Superintendenciade Banca, Seguros y AFP 1 1 1

117 Philippines Insurance Commission 1 1 1

118 Qatar 1 1 1

119 Republic of Korea Financial Supervisory Service 1 1 1

120 Republic of Maldives 1 1 1121 Russia 1 1 1122 Rwanda 1 1 1123 Samoa Samoa International Finance Authority 1 1 1124 San Marino 1 1 1125 Saudi Arabia Saudi Arabian Monetary Agency 1 1 1126 Singapore Monetary Authority of Singapore 1 1 1127 South Africa Financial Services Board 1 1 1128 Sri Lanka Insurance Board of Sri Lanka 1 1 1

129 Sultanate of Oman 1 1 1


PE 542.19768


No. ofcountries


130 Suriname Centrale Bank van Suriname 1 1 1131 Swaziland 1 1 1132 Switzerland Swiss Financial Market Supervisory Authority 1 1 1133 Tanzania ISD 1 1 1134 Thailand 1 1 1135 Trinidad & Tobago 1 1 1136 Tunisia 1 1 1

137 Turks & Caicos BWI 1 1 1

138 Uganda 1 1 1

139 United Arab Emirates Dubai Financial Services Authority 1 1 1

140 United Arab Emirates Insurance Authority 1 sec sec141 Uruguay Banco Central de Uruguay 1 1 1142 USA Federal Insurance Office (FIO) 1 1 1143 USA Federal Reserve 1 Sec sec144 USA NAIC + 56 US jurisdictions 15 Sec 56145 Uzbekistan 1 1 1146 Vanuatu VanuatuFinancial Services Commission 1 1 1147 Vietnam 1 1 1148 Zambia PIA 1 1 1

149 Asian Development Bank 0 0 0

150 CIMA 1 14 1

151 IMF 0 0 0

152 OECD 0 0 0153 World Bank 0 0 0

Tot al Members 153 162 146 190

Source: www.iaisweb.org, 2015 IAIS Annual Member Fees, updated 13 February 2015: plus OECD; ICODAEuropean Affairs-Lowet analysis.Note: ‘Sec’ = Secondary Authority.


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ANNEX III: Composition/Members of the IAIS ExecutiveCommittee

Jurisdiction Name Position EU

Austria Peter Braumüller Non-voting Member, Chair of theBudget Committee Yes

EU, EIOPA Gabriel Bernardino Member Yes

France Sandrine Lemery Member Yes

Germany, BaFin Felix Hufeld Chair Yes

Italy Alberto Corinti Non-voting Member, Chair of theFinancial Stability Committee Yes

Poland Damian Jaworski Member Yes

UK, PRA Victoria Saporta Member Yes

Australia, APRA Ian Laughlin Member No

Canada, OSFI Bernard Dupont Member No

Cayman Islands Cindy Scotland Member No

Chile Ernesto Rios Member No

China Junbo Xiang Member No

Guernsey William Mason Member No

India TS Vijayan Member No

Japan Takashi Hamano Vice-Chair No

Korea Heungchan Park Member No

Lebanon Walid Genadry Member No

Mexico Manuel Aguilera-Verduzco Member No

Peru Daniel Schydlowsky Member No

Saudi Arabia Khalid Althieb Member No

Singapore Keng Yi Lee Member No

South Africa Jonathan Dixon Member, Chair of theImplementation Committee No

Switzerland Peter Giger Member No

USA, FIO/Treasury Michael McRaith Non-voting member, Chair of theTechnical Committee No

USA, Florida Kevin McCarty Vice-Chair No

USA, New Jersey Kenneth Kobylowski Member No

USA, Tennessee Julie McPeak Member No

TOTAL MEMBERS 27 7

Source: IAIS Newsletters (November 2014, January 2015, March 2015), ICODA European Affairs-Lowet analysis.


PE 542.19770

ANNEX IV: Financial Statements analysisAccording to IAIS statement of financial positions, at 31 December 2013, in CHF,213 theoperating revenue in 2013 comprised

CHF 3.9 million from membership fees;

CHF 2.6 million from observership fees214 and

a net annual conference income of CHF 0.2 million215.

There was no miscellaneous income.

The audited financial statements show a surplus of CHF 641,708.

Besides the benefits recorded in the Financial Statements, other benefits recorded are thefollowing:

Support of the BIS: administration, accounting, office space and other advisoryservices, staff pension scheme.

Members’ secondment of staff to its Secretariat. The amount of this benefits has notbeen determined.

Support of FSA Japan Grant: an annually contribution, held outside the IAISStatements, is made. There was a balance of CHF 403,292 as at 31 December 2013.

IAIS Education Fund: contributions of donors are made to be used for educationalpurposes. The balance of the fund, held outside the IAIS Financial Statements, was,at 31 December 2013, CHF 129,024.

IAIS is exempt from income tax.216

The IAIS acknowledged special support during 2013-2014 from BIS, the Bermuda MonetaryAuthority, the Financial Supervisory Commission (Chinese Taipei), the Financial ServicesAgency (Japan), the Financial Supervisory Service (Republic of Korea), and the MonetaryAuthority of Singapore.

The IAIS is now committed to be a fully public sector funded organisation.217

213 Annual Report IAIS 2013-2014, p. 39.214 In 2013, the flat fee for observers amounted CHF 19,000. As of 2015, there are no observers anymore in IAIS.215 Financial Statements IAIS 2013-2014, p.44.216 Annual Report IAIS 2013-2014, p. 42.217 IAIS Newsletter January 2014, p.1.


PE 542.197 71

ANNEX V: IAIS Fee Structure 2011-2015 (by category in CHF)

GDP Premium volume 2011/CHF 2012/CHF 2013/CHF 2014/CHF 2015/CHF

A1. Low less than US 2,000m 12,500 13,200 14,100 15,100 16,200A2. Middle less than US 2,000m 13,500 14,200 15,200 16,300 17,400A3. High less than US 2,000m 16,500 17,800 19,000 20,400 21,800B1. Low US 2,000 - 12,500m 14,500 15,300 16,300 17,500 18,700B2. Middle US 2,000 - 12,500m 16,500 17,800 19,000 20,400 21,800B3. High US 2,000 - 12,500m 23,000 23,900 25,600 27,400 29,300C1. Low US 12,500 - 60,000m 18,000 19,800 21,200 22,700 24,300C2. Middle US 12,500 - 60,000m 23,000 23,900 25,600 27,400 29,300C3. High US 12,500 - 60,000m 35,000 37,200 39,800 42,500 45,600D1. Low US 60,000 - 600,000m 26,000 28,000 30,000 32,100 34,300D2. Middle US 60,000 - 600,000m 35,000 37,200 39,800 42,500 45,600D3. High US 60,000 - 600,000m 59,000 62,700 67,100 71,800 76,800E3. High* above US 600,000m 280,500 296,300 317,000 339,200 362,900

Secondary authorities and international organisations (‘sec’) 12,500 13,200 14,100 15,100 16,200

Observership** 16,500 17,800 19,000 20,400 21,800Percentage increase on previous year 10 %* 7 %* 7 % 7 % 7 %

Source: IAIS, Strategic Plan and Financial Outlook 2011-2015, 2 July 2010.Note: *Categories E1 and E2 are unlikely to come into use.**Observer fees are currently linked to level B2. However, as part of follow-up work on the strategic review a possible differentiation of Observer fees will be discussed.Observers are no longer present in IAIS as of 2015.


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ANNEX VI: IAIS Annual Member Fee 2015

Jurisdiction CHF Jurisdiction CHF

Africa - CIMA 16,200 Kosovo 17,400

Albania 17,400 Latvia 17,400

Argentina 29,300 Lebanon 17,400

Armenia 17,400 Lesotho 16,200

Aruba 21,800 Liechtenstein 29,300

Asian Development Bank 16,200 Lithuania 17,400

Australia (APRA) 76,800 Luxembourg 45,600

Australia (PHIAC) 16,200 Macau 21,800

Australia (NSW) 16,200 Macedonia 17,400

Austria 45,600 Malawi 16,200

Azerbaijan 17,400 Malaysia 29,300

Bahamas 21,800 Malaysia (Labuan) 17,400

Bahrain 21,800 Maldives (Republic of) 17,400

Bangladesh 16,200 Malta 29,300

Barbados 21,800 Mauritius 17,400

Belarus (Republic of) 17,400 Mexico 29,300

Belgium 45,600 Moldova (Republic of) 17,400

Belgium (FSMA) 16,200 Mongolia 17,400

Belize 17,400 Montenegro 17,400

Bermuda 76,800 Morocco 21,800

Bhutan 17,400 Namibia 17,400

Botswana 17,400 Nepal 16,200

Brazil (ANSS) 16,200 Netherlands 76,800

Brazil (SUSEP) 45,600 Netherlands (AFM) 16,200

British Virgin Islands 21,800 New Zealand (ReserveBank) 29,300

Brunei Darussalam 21,800 Nigeria 17,400


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Bulgaria 17,400 Norway 45,600

Burundi 16,200 Pakistan 16,200

Cambodia 16,200 Palestine 17,400

Canada (OSFI) 76,800 Panama 17,400

Canada (FICOM) 16,200 Papua New Guinea(Authority) 17,400

Canada (Quebec) 16,200 Papua New Guinea(Ministry) 16,200

Cape Verde 17,400 Paraguay 17,400

Cayman Islands, BWI 29,300 Peru 21,800

Chile 21,800 Philippines 21,800

China 45,600 Poland 29,300

China, Hong Kong 45,600 Portugal 45,600

Chinese Taipei 76,800 Qatar 21,800

Colombia 21,800 Romania 21,800

Costa Rica 17,400 Russia 29,300

Curaçao and Sint Maarten 21,800 Rwanda 16,200

Cyprus 21,800 Samoa 17,400

Czech Republic 29,300 San Marino 21,800

Denmark 45,600 Saudi Arabia 29,300

Ecuador 17,400 Serbia 17,400

Egypt 17,400 Singapore 45,600

EIOPA 16,200 Slovakia 29,300

El Salvador 17,400 Slovenia 29,300

Estonia 21,800 South Africa 29,300

European Commission 16,200 Spain 76,800

Finland (Authority) 29,300 Sri Lanka 17,400

Finland (Ministry) 16,200 Sultanate of Oman 21,800

France (ACP) 76,800 Suriname 17,400


PE 542.19774


Germany (BAFIN) 76,800 Swaziland 17,400

Germany (Ministry) 16,200 Sweden 45,600

Ghana 17,400 Switzerland 76,800

Gibraltar 29,300 Tanzania 16,200

Guatemala 17,400 Thailand 29,300

Guernsey 29,300 Trinidad & Tobago 21,800

Guinea 16,200 Tunisia 17,400

Hungary 29,300 Turkey 21,800

Iceland 21,800 Turks & Caicos BWI 17,400

IMF 16,200 Uganda 16,200

India 45,600 United Arab Emirates(DFSA) 29,300

Indonesia 29,300 United Arab Emirates(Authority) 29,300

Ireland 45,600 United Kingdom (PRA) 76,800

Isle of Man 45,600 United Kingdom (FCA) 16,200

Israel 29,300 Uruguay 17,400

Italy 76,800 USA (FIO) 16,200

Jamaica 17,400 USA (FRB) 16,200

Japan 76,800 USA (NAIC) 362,900

Jersey 21,800 Uzbekistan 17,400

Jordan 17,400 Vanuatu 17,400

Kazakhstan 17,400 Vietnam 17,400

Kenya 16,200 World Bank 16,200

Korea (Republic of) 76,800 Zambia 17,400

TOTAL 4,495,000Source: 2015 IAIS Annual Member Fees, February 2015.


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ANNEX VII: KPMG Overview of FSAP Results

Source: KPMG, Evolving Insurance Regulation, March 2014.


PE 542.19776

ANNEX VIII:International Law Association (ILA) - Accountability Framework

Recommended Rules and Practices (RRP's) Applies Comments

Section 1: RRPs based on principles, objectives and concepts common to all International Organisations (IOs)

A. Principles of good governance

A.1. Transparency

1. IOs should, as a general rule, adopt normative decisions in a publicvote No IAIS does not adopt standards in a public vote.

2. Meetings of non-plenary organs should in principle be public unlessinappropriate. No Meetings of non-plenary organs are not public.

3. Non-plenary organs of an IO should as a general rule grant throughtheir Rules of Procedure an appropriate status to Member States,other States, and non-State entities particularly affected by decisionsto be taken or contributing to operational activities.

Yes/No

No established status in the IAIS By-Laws for ‘other states’ and ‘non-state entities’ The Chair has the right to invite experts of all kind tounderstand impact of activities.Member States have an appropriate status in the ExCo and theWorking Groups and Task Forces. All Members can attend the ExCoand can be a member of all Subcommittees.

A.2. Participatory decision-making process

1. Plenary organs of an IO should make appropriate proceduralarrangements enabling all Members to participate fully in the decision-making process.

YesThe IAIS also has a formal decision making process in place (withinMember Handbook) that describes the details of how a decision isreached.

2. Plenary organs of an IO should periodically review the membershipof non-plenary organs especially those possessing executive powers Yes

2-year review of ExCo Members. The Subcommittees have an openmembership policy, all Members can attend when deemednecessary. There is a review procedure in place for Committees andSubcommittees. For Task Forces, the number of members can belimited, but attendance is possible in any but very limited cases.

3. When taking or reviewing decisions on coercive measures, organsshould enable Member States whose interests are specially affected toexpress their views.

NA No coercive measures.


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A.3. Access to information

1. Documents of an IO should, as a general rule, be available to allMember States. Competent organs should, at regular intervals, reviewrestrictions on access to documents.

YesAccess to full extranet. Source: interviews. In general true but withexceptions. Data may be one of the areas where access is limited toactual (Sub)Committee members.

2. IO-s should as a general rule formulate and publish plans settingthe general orientation of their programmes and establishing theobjectives to be achieved and the strategies to be followed.

Yes Publication of Annual Report & IAIS Mission and strategic goals &Newsletter.

3. When engaging in operational activities of a humanitarian,development or peacekeeping nature, IO-s should provide appropriatechannels of communication to the State or non- state entityconcerned, and to groups and individuals whose interests areparticularly affected by such an operation, to enable them to maketheir point of view known in a timely fashion.

N/A No humanitarian, development or peacekeeping activities.

4. Subject to the provisions of paragraph 7 below, IO-s should ensureaccess by the public to information held by them (including theirarchives). IO-s should not deny applications for access to informationexcept for compelling reasons on limited grounds such as privacy,commercial and industrial secrecy, or protection of the security ofMember States or private parties.

Yes/no No public access policy. No full overview of archive. Internal rules ofprocedure not available without any compelling reasons given.

5. Non-plenary organs of an IO should provide information about theiractivities to all Member States and wherever possible should makeavailable the text of draft decisions under consideration.

Yes

Access to extranet. Source: Interviews.IAIS uses summary records to inform members. Additionally theNewsletter provides information and all members can participate atCommittee Meetings where all Subcommittees usually present thestatus quo of their work. For further information you can also see theIAIS' stakeholder policy.

6. When direct participation in confidential but formal consultationsduring private meetings is not possible, the non-plenary organ shouldorganise a briefing for non- Members.

Yes See Stakeholders Policy.


PE 542.19778


7. IOs should ensure effective protection against the disclosure ofinformation which has come to their knowledge in circumstancesimposing an obligation of confidentiality, and, when appropriate,should protect the identity of those who provide them withinformation.

Yes

Usually information of IAIS meetings are ‘for members only’,restricting publication unless decided differently by Committees.Thus, Members Handbook provides for confidentiality.IAIS can close meetings for compelling reasons set out in theHandbook which has also a detailed Confidentiality & DocumentDistribution Policy.

8. IOs should publish regular reports on the measures they havetaken to implement the above provisions on public access to and thepreservation of confidentiality of documents and information.

No

A.4. Well-functioning International Civil Service

1. Each IO should secure within its Secretariat the highest standardsof efficiency, competence and integrity and enforce the principles ofimpartiality, loyalty to the aims and purposes of the IO, functionalindependence and discretion, and the principles of equitablegeographical representation and gender balance.

Yes

2. IOs should not implement the above principles in such a manner asto prejudice the proper administration of justice. Yes

3. IOs should provide for effective mechanisms of supervision andcontrol over the Executive Head and the Secretariat. Yes Article 14(6)(j) IAIS By-Laws.

A.5. Sound financial management

1. IOs should ensure as wide a participation as possible by MemberStates in the budgetary process. Yes

All Members are entitled to be member of the Budget Committee.The annual budget is approved at the Annual General Meeting, whichevery Member is entitled to attend.

2. IOs should maintain as far as possible a consistent methodology ofbudgetary presentation. Yes This presentation is given in the Budget Committee.


PE 542.197 79


3. IOs should ensure that budget is presented as to facilitate internaland external audit and accountability. Accordingly:a) budget should be presented in such a way as to demonstrate thateach budgetary item has been duly authorised;b) operational expenditure should be separately identified andaccounted for;c) the role of extra-budgetary resources, including resources utilisedby agencies and quasi-autonomous bodies, should be made clear;d) the same presentation and budget methodology should be utilisedfor both regular budgetary and extra-budgetary resources.

a) Yesb) Yesc) Yesd) N/A

Budget is in Year Report; Budget Committee presents moreinformation to ExCo. All financials are audited by external auditor.With introduction of project management, IAIS will be able to betterkeep track of budget items and present the results in a morecomprehensive way. The IAIS also has internal finance-relatedpolicies and procedures with specific approval thresholds for differentlevels of expenditures. We also question what is meant by ‘extra-budgetary resources’ in part d) of this question and whether that isapplicable to the IAIS.

4. Organ vested with approval of budget should allocate appropriatefunding for activities duly decided by competent IO organs. It shouldnot approve appropriations, which it considers, in good faith, to beunnecessary or excessive.

YesExCo decides on the Roadmap, which contains all projects andtherefore determines the necessary budget. ExCo also approves theBudget, but the final decision is taken by the General Meeting.

5. During the course of the budgetary period interim financial andprogramme performance reports should be made available togoverning bodies at regular intervals.

Yes

In line with project management, IAIS is introducing severalmeasures to evaluate progress of all work streams, includingwatching financials of each project; monthly internal (withinSecretariat) financial reporting and analysis as well as quarterlyreporting to the Budget Committee.

6. IOs should establish rules and standards for acceptance ofvoluntary contributions, gifts & donations from whatever source, andfor creation of trust funds, designed to ensure that they are consistentwith the policies, aims and activities of the Organization. An IO whichaccepts voluntary contributions, gifts and donations, remainsaccountable to the Member States both for having accepted them andfor the way they are spent.

yes

The IAIS has at least one rule on voluntary contributions - the IAISAnnual Conference guide states that no contributions can beaccepted from non-Members. MoUs in place for voluntarycontributions. For secondees there are contracts in each case.

A.6. Reporting and evaluation

1. IOs should publish periodic general reports on institutional andoperational activities undertaken in the period in question. Yes Newsletter, Year Report.

2. Organs to which other organs report under the rules of the IO,should ensure that such reports are regularly received in anappropriate form and properly debated whenever required.

Yes Preparation by Coordination Group and debate in ExCo, also Audit &Risk committee.


PE 542.19780


3. Prior to engaging in operational activities IOs should articulate theirobjectives and the internal lines of responsibility so as to provide areliable yardstick for subsequent evaluation.

Yesthis has recently been established by introducing projectmanagement practices and is used for the latest version of theRoadmap.

4. IOs should establish appropriate mechanisms such as functionaloperational lessons units to evaluate operational activities effectivelyand to contribute to more effective future activities.

Yes The Coordination Group fulfils this role.

5. Subsidiary organs should be required to submit periodic reports totheir parent organ. NA No subsidiary organs.

B. The principle of good faith

IOs, their organs, and their agents are under a general legalobligation to act in all their dealings in accordance with the principle ofgood faith.

Yes

C. The principles of constitutionality and institutional balance

1. Each IO is under a legal obligation to carry out its functions andexercise its powers in accordance with the rules of the organisation. Yes

2. Organs of an IO in carrying out their functions must respect theinstitutional balance laid down in the constituent instruments of theIO.

Yes

3. Organs and agents of an IO, in whatever official capacity they act,must ensure that they do not exceed the scope of their functions. Yes Control by ExCo and Secretary General.

D. The principle of supervision and control NA No subsidiary organs.

E. The principle of stating the reasons for decisions or a particular course of action

1. Organs of an IO should state the reasons for their decisions orparticular courses of action whenever necessary for the assessment oftheir proper functioning or otherwise relevant from the point of viewof their accountability.

Yes


PE 542.197 81


2. With regard to decisions of a general nature, the reasons mayrelate to the general character of such a decision only. Yes

3. With regard to a decision directly and immediately affecting rightsand obligations of particular States and non-State entities the reasonsgiven should set out the principal issues of law and fact upon whichthe decision is based.

NA

4. Non-plenary organs should reflect in their periodic reportsinformation of a non-confidential nature forming the basis of theirdecisions.

Yes

F. The principle of procedural regularity

1. IO-s should take necessary steps at all levels to:a) prevent abuse of discretionary powers;b) avoid errors of fact or of law;c) ensure respect for due process and fair treatment, especially whenorgans are exercising discretionary powers.

Yes

2. Organs of an IO vested with executive powers should [...] whencoercive measures are being considered. NA No coercive measures.

G. The principle of objectivity and impartiality

1. An IO should conduct its institutional and operational activities in amanner which is objective and impartial and can be seen to be so. Yes Every interested party is allowed to attend stakeholder meetings.

2. Officers of an organ of an IO should perform their functions in a fairand impartial manner. Yes

H. The principle of due diligence

1. Member States as Members of an organ of an IO, and organs andagents of an IO have a fundamental obligation to ensure thelawfulness of actions and decisions.

Yes

2. All organs and agents of an IO, in whatever official capacity theyact, must comport themselves so as to avoid claims against the IO. Yes


PE 542.19782


3. Members of an IO have a duty to exercise adequate supervision ofthe IO, i.e. to ensure that it is operating in a responsible manner so asto protect not only their own interests but also that of third parties.

Yes

Section Two: RRPs for treaty organs N/A No treaty organ.

Section Three: RRPs on the Relationship between NGOs and IOs

1. IO-s should establish appropriate relationships with NGOs activewithin their field of competence. Yes Every interested party is allowed to attend stakeholder meetings.

IAIS has appropriate partnerships with relevant other NGO's.

2. IO-s should as a matter of practice establish at least an NGO liaisonservice to facilitate NGO involvement in their activities. Yes See stakeholder policy.

3. Department of an IO dealing with a particular category of issuesshould regularly convene a briefing where representatives of particularNGO-s may be given an opportunity to present their views on aparticular matter or a range of issues.

yes Stakeholder meetings.

Source: ILA, IAIS By-Laws, interviews, IAIS, ICODA European Affairs-Lowet analysis.Notes: ILA (International Law Association) Accountability Recommended Rules and Practices (RRP’s), applied to IAIS, 2015, as of 25 March 2015 and cross-checked withIAIS. ICODA European Affairs – Lowet comments: a) IAIS is not an international organisation (IO) established by treaty; some RRPs are therefore not applicablewhereas others are not fit for a an international association whose Members are not Member States; b) The notion ‘Member States’ is considered ‘Members of IAIS’.


PE 542.197 83

ANNEX IX: Participation of EIOPA's chair in IAISmeetings (2012 - 2014)

2012

15 January 2012 Gabriel Bernardino meets the Chair of the ExCo of InternationalAssociation of Insurance Supervisors (IAIS) in Miami

16 January 2012 Gabriel Bernardino attends the IAIS Financial Stability Committeemeeting in Miami

16 January 2012 Gabriel Bernardino attends the IAIS ExCo meeting in Miami

22 February 2012 Gabriel Bernardino attends the IAIS ExCo meeting in Basel

1 May 2012 Gabriel Bernardino and Carlos Montalvo welcome representatives ofthe IAIS in Frankfurt

19 June 2012Gabriel Bernardino participates via teleconference in the IAISComFrame Dialogue and the joint IAIS Executive & Financial StabilityCommittee meeting held in Cayman Islands

20 June 2012 Gabriel Bernardino participates via teleconference in the joint IAISExecutive & Technical Committee meeting held in Cayman Islands

7 October 2012 Gabriel Bernardino, IAIS ExCo Member, attends the IAIS ExCoMeetings in Washington

9 October 2012 Gabriel Bernardino participates in a panel discussion at the 19th IAISAnnual Conference in Washington.

9 October 2012 Gabriel Bernardino and Carlos Montalvo attend IAIS Annual/GeneralMeeting in Washington

2013

12 January 2013 Gabriel Bernardino attends the International Association of InsuranceSupervisors Committees meetings in New Orleans

21 March 2013 Gabriel Bernardino attends the IAIS meeting in Basel

15 October 2013 Gabriel Bernardino and Carlos Montalvo attend the 20th IAIS AnnualConference in Chinese Taipei

18 October 2013 Gabriel Bernardino participates in an IAIS ExCo in Chinese Taipei

2014

10 January 2014 Gabriel Bernardino participates in an IAIS ExCo in San Diego, USA.

17 March 2014 Gabriel Bernardino participates in an IAIS ExCo in Basel

19 June 2014 Gabriel Bernardino participates in an IAIS ExCo in Quebec

3 September 2014 Gabriel Bernardino participates in an IAIS ExCo in Basel.

Source: www.eiopa.eu, calendar, situation 18 March 2015, ICODA European Affairs-Lowet analysis.


PE 542.19784

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