International Association of Insurance Supervisors

Insurance Core Principle (ICP) material adopted October 2010

(to be included in full set of ICPs to be adopted in 2011)

Standard on Group-wide Regulatory Requirements and

Guidance on Group-wide Supervision Framework (GSF)

Preamble Information (not for inclusion in the final materials)

The Standard on Group-wide Regulatory Requirements is one of two standards 1 that will
support the new ICP 23 Group-wide Supervision. The standard is in turn supported by
the guidance on Group-wide Supervision Framework (GSF).

This guidance provides the IAIS Group-wide Supervision 2 Framework (GSF) for group-
wide supervision of insurance groups.
In particular, this guidance aims to provide:
 an overview of the key components of a GSF (presenting them in one place,
as a comprehensive structure for group-wide supervision);
 a structure and reference point for the suite of supervisory papers on group-
wide supervision as they are developed by the IAIS (this is an overarching
paper which clarifies the linkages and inter relationships between the
components of a group-wide supervision framework);
 guidance to supervisors on components of a group-wide supervision
framework (using the GSF as a model), to facilitate and support the design
and implementation of such frameworks in individual jurisdictions.
Many insurance companies operate in the form of groups and/or subgroups of financial
conglomerates 3 and this brings unique supervisory challenges, including those arising
from the differentiated nature of regulations across the financial sectors. Although this
guidance does not directly address this issue, the GSF provides a structured basis for
considering differentiated supervisory practices in group-wide supervision for insurance
and in this regard, contributes to the effective supervision of insurance subgroups within
financial conglomerates. It should be noted that the IAIS is currently developing a
separate guidance paper on financial conglomerates and cross-sectoral supervision.

1
The other standard is Standard on Scope of Group, Supervisory Power and Legal Authority.
2
While referred to as the Group-wide Supervision Framework, the scope of the framework encompasses
aspects of a regulatory regime and supervisory regime necessary to facilitate effective group-wide
supervision. Both aspects are important and are closely interrelated.
3
In this paper, the term “financial conglomerate” is any group of companies under common control whose
exclusive or predominant activities consist of providing significant services in at least two different financial
sectors (banking, securities, insurance).

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 International Association of Insurance Supervisors
Insurance Core Principle (ICP) material adopted October 2010
(to be included in full set of ICPs to be adopted in 2011)

ICP 23 Group-wide supervision

The supervisor supervises insurers on a solo and group-wide basis.

23.9 The supervisor establishes an effective and efficient group-wide

supervision framework.
23.9.1 As is illustrated by the diagram below, in designing a framework for
group-wide supervision, consideration needs to be given to:
 The scope of group-wide supervision;
 The pre-conditions for effective group-wide supervision;
 The application of the principle of proportionality;
 The interplay between the design of the framework and its
implementation; and
 The ultimate objectives of the group-wide supervision.

Figure 1: Considerations for a Group-wide Supervision Framework

Group-wide Supervision

Scope

Insurance Groups/ Financial

Conglomerates

Preconditions

Proportionality

Implementation Framework

Ultimate Objective

Effectiveness

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 International Association of Insurance Supervisors
Insurance Core Principle (ICP) material adopted October 2010
(to be included in full set of ICPs to be adopted in 2011)
SCOPE

23.9.2 The scope of the Group-wide Supervision Framework (GSF) is

elaborated under the Standard on Scope of Group, Supervisory
Power and Legal Authority which provides the definition of an
insurance group for group-wide supervision purposes. The GSF for
insurance groups should be designed to reduce regulatory arbitrage
across jurisdictions/ sectors with due regard to the specificities of
the insurance business model and to facilitate the supervision of
cross-border/ cross-sectoral groups; and address all relevant
entities and risks to insurance groups.

PRECONDITIONS

23.9.3 The way in which individual jurisdictions will implement the GSF
depends upon the existence of a set of preconditions in that
jurisdiction. Relevant international preconditions need to also be
taken into account. Refer to paragraph 23.9.9 and 23.9.10.

PROPORTIONALITY

23.9.4 The GSF, and its application in practice, should be proportionate to

the nature, scale and complexity of the insurance group.

FRAMEWORK AND IMPLEMENTATION

23.9.5 The implementation of the general GSF model is dynamic and the
implemented GSF will need to be regularly reviewed by supervisors
to identify areas for improvement and to reflect changes in the
market and group structures. The results of the review, in turn,
should be fed back to allow enhancement of the framework, thus
forming an iterative process.

ULTIMATE OBJECTIVE

23.9.6 The ultimate objective of group-wide supervision is to promote

effective supervision of insurance groups. The establishment of the
GSF is expected to facilitate appropriately streamlined, consistent
and effective group-wide supervision – supporting a supervisory
framework that preserves the standards of protection of
policyholders and maintains the soundness of each insurer and
overall financial stability, as well as avoiding unnecessary overlaps
and material deficiencies, and unnecessary burden for the industry.
23.9.7 The GSF is based on, and aligns consistently with, the IAIS
Framework for Insurance Supervision, (the Insurance Framework).
The GSF is designed with similar building blocks to those in the
Insurance Framework: preconditions, regulatory requirements and
supervisory assessment. These building blocks establish the broad
infrastructure for the GSF to facilitate an effective framework.

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 International Association of Insurance Supervisors
Insurance Core Principle (ICP) material adopted October 2010
(to be included in full set of ICPs to be adopted in 2011)
23.9.8 The GSF takes primarily a structured and functional approach, and
is a means of viewing the Insurance Framework through a group-
wide supervision lens (Figure 2).

Figure 2: GSF and how it relates to the Insurance Framework

GROUP-WIDE SUPERVISION FRAMEWORK (GSF)

Group-wide
LEVEL 3 supervisory assessment

Group-wide
LEVEL 2 regulatory requirements

Preconditions for
LEVEL 1 group-wide supervision

LEVEL 1 PRECONDITIONS

23.9.9 As illustrated in Figure 2, preconditions need to be established for

group-wide supervision to be effective and serve as a foundation for
the GSF model. The preconditions for effective insurance
supervision (as described in the Introduction of the ICPs) are
similarly applicable in the context of the GSF.
23.9.10 In addition, specific preconditions with regards to group-wide
supervision that need to be considered include the following:
 in accordance with ICP 1 and 2, the supervisor should also have the
necessary supervisory power, legal authority, capacity and capabilities,
including the skills, resources and experiences to carry out group-wide
supervision (insert link to ICP 1 and 2);
 in accordance with ICP 3, the ability and willingness to cooperate with
other relevant supervisors on a cross-border and/ or cross-sector basis,
including information sharing, in a secure environment based on mutual
trust, understanding and confidence (insert link to ICP 3); and
 in accordance with ICP 23, a clear identification of an insurance group
for group-wide supervision (insert link to ICP 23).

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 International Association of Insurance Supervisors
Insurance Core Principle (ICP) material adopted October 2010
(to be included in full set of ICPs to be adopted in 2011)

LEVEL 2 GROUP-WIDE REGULATORY REQUIREMENTS

23.10 At a minimum, the group-wide supervision framework includes, as a

supplement to solo supervision,
i) extension of solo requirements, as applicable according to the relevant
Insurance Core Principles, on:
 solvency assessment (group-wide solvency)
 governance, risk management and internal controls (group-wide
governance)
 market conduct (group-wide market conduct)
ii) requirements related to group-wide supervision on:
 complexity of group structure
 cross-border/cross-sectoral issues
 interplay with solo supervision
 non-regulated entities.
23.10.1 The following chart (Figure 3) expands on the Level 2 block in
Figure 2 and shows the components that have been identified as
important elements of the GSF and depicts the relationship between
preconditions for group-wide supervision, group-wide regulatory
requirements and group-wide supervisory assessment. This is a
more detailed depiction of the previous chart Figure 2 but not
necessarily an exhaustive list of components.

Figure 3: Group-wide Supervision Framework

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 International Association of Insurance Supervisors
Insurance Core Principle (ICP) material adopted October 2010
(to be included in full set of ICPs to be adopted in 2011)

Group-wide
supervisory assessment

GROUP-WIDE SUPERVISION FRAMEWORK (GSF)

- group-wide regulatory requirements -

Extension of solo requirements Requirements related to group-wide

supervision environment
I II III IV V VI VII
Group- Group-wide Group-wide Cross- Interplay Financial Non-
wide governance market border with solo conglo- regulated
solvency conduct supervision merates entities

Capital Corporate Intermediaries Role of Relation to solo Cross-sector Non-

adequacy governance group-wide requirements regulatory operating
supervisor arbitrage holding
companies
(NOHCs)

Enterprise Internal Conduct of Supervisory Role of group- Cross-

risk governance and business recognition wide vs solo sectoral
management control supervision supervision Non-
regulated
operating
entities
(NROEs)
Internal Suitability of Fraud Supervisory
models persons colleges

Complexity
of group
structure
Investments AML/CFT Information
exchange

Valuation for
solvency
Delegation of
purposes
tasks/ home
vs host

Preconditions for
group-wide supervision

23.10.2 The GSF identifies the structure, or building blocks, for the various
components of group-wide supervision so that the supervisor can
appropriately cover these areas within its own group-wide
supervision framework.
23.10.3 The preconditions of group-wide supervision, shown at the base of
the chart, lay the foundation for group-wide regulatory requirements.
23.10.4 The main box identifies the areas to be covered by group-wide
regulatory requirements. Columns I to III are areas in which solo
requirements are extended and columns IV to VII are those which
are specific to group-wide supervision. Considering all elements will
assist the supervisor to make an effective assessment of the
strength and interconnectedness of a group and exercise
intervention measures as required. It is recognised that the

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 International Association of Insurance Supervisors
Insurance Core Principle (ICP) material adopted October 2010
(to be included in full set of ICPs to be adopted in 2011)
elements in the chart are likely, in practice, to overlap and interact
with each other.
23.10.5 It can be seen from the chart that group-wide supervision is much
broader than, for example, group-wide solvency assessment. It
covers a wide spectrum of interrelated areas, such as the role of,
and relationship between, home and host supervisors in the case of
cross-border insurance groups.

EXTENSION OF SOLO REQUIREMENTS

23.10.6 The GSF is essentially similar in principle to the Insurance

Framework but takes a group-wide perspective. Given that a group
is essentially a composite of solo entities, the regulatory
requirements and supervisory assessment under a GSF should
address financial (or group-wide solvency assessment), governance
and market conduct issues.

GROUP-WIDE SOLVENCY ASSESSMENT

23.10.7 Group-wide solvency assessment involves assessing whether

management of risk and capital for the group is adequate especially
to the extent that the group conducts activities that may adversely
affect the financial/solvency position of insurance entities within the
group. It covers other important areas such as investments in
affiliated entities, intra-group transactions and exposures, and
double gearing of capital.
23.10.8 The elements of group-wide solvency assessment that should be
considered are:
 capital adequacy (insert link to standard and guidance)
 enterprise risk management (insert link to standard and guidance)
 use of internal models (insert link to standard and guidance)
 investments (insert link to standard and guidance)
 valuation for solvency purposes (insert link to standard and guidance)

GROUP-WIDE GOVERNANCE, RISK MANAGEMENT AND

INTERNAL CONTROLS

23.10.9 Group-wide governance involves the governance structure

surrounding the head of the group and all other material entities in
the group including subgroups - its board of directors, senior
management and any other persons who effectively run the
undertaking, the ownership/ shareholders and the risk management
and internal control processes, including the reach of these
arrangements to cover all the activities and entities of the insurance
group.
23.10.10 The elements of group-wide governance that should be considered
are:

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 International Association of Insurance Supervisors
Insurance Core Principle (ICP) material adopted October 2010
(to be included in full set of ICPs to be adopted in 2011)
 corporate governance (insert link to standard and guidance)
 internal governance and control (including governance of the risk
management function, internal audit function, compliance function and
actuarial function) (insert link to standard and guidance)
 suitability of persons (insert link to standard and guidance)

GROUP-WIDE MARKET CONDUCT

23.10.11 Group-wide market conduct is concerned with how insurers within a

group and/or the group as a whole conduct their business activities,
especially as they involve the treatment of policyholders and
disclosures to the public. There should be consideration of how
market conduct issues may relate to reputational and contagion risk.
23.10.12 Group aspects relevant to market conduct that should be
considered include:
 the disclosure of regulatory requirements in respect of the offering of
cross-border insurance
 the disclosure to customers of the group to which a policy underwriter
belongs
 the potential risks from group entities that could affect policies being
sold or administered
 the consistency of policies on market conduct within a group
 the potential use of group structures for fraud, money laundering or
terrorist financing.
Principles, standards and guidance dealing with market conduct issues
include:
 intermediaries (insert link to standard and guidance)
 conduct of business (insert link to standard and guidance)
 fraud (insert link to standard and guidance)
 AML/CFT (insert link to standard and guidance)

REQUIREMENTS RELATED TO GROUP-WIDE SUPERVISION

ENVIRONMENT

23.10.13 In addition to those components that are extensions of solo

requirements, a GSF has requirements that are related to a group-
wide supervision environment. These components are cross-border
relationships, interplay with solo supervision, financial
conglomerates and non-regulated entities. These overlay, and thus
are interconnected with, those aspects that are extensions to solo
requirements within a GSF. For example, the regulatory framework
must have regard for information exchange and other elements that
are related to the group-wide supervision environment.

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 International Association of Insurance Supervisors
Insurance Core Principle (ICP) material adopted October 2010
(to be included in full set of ICPs to be adopted in 2011)
CROSS-BORDER

23.10.14 The development of an effective process for group-wide supervision

on a cross-border basis may require cooperation arrangements.
There is a need to move towards establishing increased cooperation
processes that closely involve the supervisors in charge of the
different components of a group. Taking into account that the
effective supervision of insurance groups requires flows of
information, appropriate cooperation processes for achieving this
need to be considered.
23.10.15 Regulatory cooperation includes insurance supervisors as well as
other financial services regulators involved in the regulation of the
insurance entities and other legal entities of the group.
23.10.16 It is important that a GSF permits all entities in a group, regardless
of where they reside, to be appropriately assessed, including non-
regulated entities. A supervisor has limited ability to assess the
operations and risks arising from activities and group entities in
foreign jurisdictions. Accordingly, a GSF should provide for
supervisors to establish effective cross-border relationships with one
another. This cooperation and collaboration could be achieved
through the appointment of a group-wide supervisor, Memorandums
of Understanding (MoU), Multilateral Memorandums of
Understanding (MMoU – insert link to paper), and/or supervisory
colleges (insert link to paper).
23.10.17 The delegation of tasks between supervisors should be
distinguished from the delegation of responsibilities, which results in
a change in the allocation of decision making power. In case of a
delegation of tasks, the decision making power is maintained by the
delegator. Additionally, the delegation of tasks is always on a
voluntary basis.

GROUP-WIDE SUPERVISOR

23.10.18 One of the key issues surrounding cross-border supervision of

groups is the appointment and role of the group-wide supervisor.
The designation of a group-wide supervisor must be based on
mutual trust and confidence among the involved supervisors. One of
the ways of streamlining group-wide supervision would be for other
supervisors to rely on the group-wide supervisor for key questions at
group level.
23.10.19 The group-wide supervisory approach and the principle of non-
duplication will typically affect the supervision of the group as a
whole; it should not prevent supervision at the relevant lower levels
(legal entities or subgroups) by the respective supervisors in each
jurisdiction depending on the legal framework.
23.10.20 A process of group-wide supervision requires, at a minimum,
confidence and recognition among the supervisors involved. Further,
under this approach the supervisors involved may need to agree
upon which supervisory tasks relate to the group and which to

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 International Association of Insurance Supervisors
Insurance Core Principle (ICP) material adopted October 2010
(to be included in full set of ICPs to be adopted in 2011)
individual members of the group to avoid unnecessary duplication.
When reasonably requested, the group-wide supervisor should be
able to exchange with other supervisors relevant supervisory
information, financial data, and other important information, whether
under formal or informal agreements.
23.10.21 The role and responsibilities of a group-wide supervisor are
elaborated further under ICP 3 Supervisory Cooperation,
Coordination and Information Sharing.

SUPERVISORY COLLEGE

23.10.22 Another mechanism for assisting in the coordination and

cooperation among involved supervisors is a supervisory college.
Efficient and timely exchange of information among supervisors is
critical to effective and efficient supervision. Depending on the
activities of a group and the jurisdictions where it is active, it may be
more efficient for group-wide supervision to be supported by a more
formal structure, such as a supervisory college. Where adopted, the
composition of such a college needs to be considered, in particular
whether it should include all involved supervisors or only the more
relevant ones according to the risk profile of the group.
23.10.23 The use of supervisory colleges in group-wide supervision is further
elaborated under ICP 3 Supervisory Cooperation, Coordination and
Information Sharing.

INTERPLAY WITH SOLO SUPERVISION

23.10.24 The GSF is not meant to lessen the importance of solo supervision,
or to replace the role of the solo supervisor. Instead, it is intended
to supplement solo supervision, and recognises the respective role
and requirements of the solo supervisor as an important part of an
effective group-wide supervision framework.

FINANCIAL CONGLOMERATES

23.10.25 In addition to cross-border issues, a GSF must have regard for

cross-sector matters, particularly when applying group-wide
supervision to financial conglomerates.
23.10.26 Financial conglomerates are comprised of legal entities subject to
the oversight of two or more supervisors belonging to different
sectors (except in the case of integrated supervisors); hence, there
is a great need for supervisors to cooperate on both a cross-border
and cross-sector basis. Communication and information-sharing are
the fundamental building blocks of cooperation. Accordingly, the
GSF should allow communication and coordination arrangements
among cross-sector supervisors for both emergency and non-
emergency situations (as is also the case for insurance groups).
This mechanism could be established among the involved
supervisors through a coordinator, who effectively operates as the
group-wide supervisor.

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 International Association of Insurance Supervisors
Insurance Core Principle (ICP) material adopted October 2010
(to be included in full set of ICPs to be adopted in 2011)
23.10.27 Cross-sector regulatory arbitrage can arise when products or
services with the same (or similar) characteristics receive different
regulation by various sectors. The Joint Forum report on the
differentiated nature and scope of regulation further elaborates on
this issue. An example would be Credit Default Swaps and financial
guarantee insurers. These have similar risk characteristics, but can
be written by sectors with different regulatory capital requirements.
A financial conglomerate opens the opportunity for cross-sector
regulatory arbitrage. Financial conglomerates could structure
operations in a manner where products or services are regulated by
the sector with the less stringent requirements.
23.10.28 In order to provide added value in terms of prudential supervision,
the creation of a coordination arrangement for a specific financial
conglomerate could enhance the quality of the supervision of the
separate licensed entities of the group, without infringing on the
responsibilities of the solo supervisors of the licensed entities and of
the group as a whole.

NON-REGULATED ENTITIES

23.10.29 Different forms of non-regulated entities may be members of a

group including non-operating holding companies (NOHCs),
operating holding companies and other operating entities that are
not subject to any direct prudential supervision (known as non-
regulated operating entities or NROEs). The latter may take on a
wide variety of forms, including businesses ancillary to the financial
operations of the group or unrelated financial business (for example,
a retail business). A GSF should include such entities within its
scope.
23.10.30 Refer to the Guidance paper on treatment of non-regulated entities
in group-wide supervision for further information (insert link to
paper).

LEVEL 3 GROUP-WIDE SUPERVISORY ASSESSMENT

23.11 The supervisor provides for group-wide supervisory assessment of an

insurance group’s adherence to the group-wide regulatory requirements.
23.11.1 The third level of the GSF is group-wide supervisory assessment (or
group-wide supervisory review and reporting). A GSF should
provide supervisors with the authority to carry out such
assessments by providing for access to information and on- and off-
site inspection. Supervisory assessment on a group-wide basis
should be undertaken to determine whether or not groups are
adhering to the group-wide regulatory requirements and are
operating in a sound and prudent manner. Remedial or
enforcement actions should be taken in coordination with other
involved supervisors, where required and appropriate. Group-wide
supervision should take into account the nature, scale and
complexity of these groups; hence the supervisory assessment

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 International Association of Insurance Supervisors
Insurance Core Principle (ICP) material adopted October 2010
(to be included in full set of ICPs to be adopted in 2011)
needs to be tailored accordingly and within the provisions allowed
by group-wide regulatory requirements.

Figure 4: GSF (Supervisory Assessment Perspective)

GROUP-WIDE SUPERVISION FRAMEWORK (GSF)

- group-wide supervisory assessment -

Group-wide
Systemic aspects supervisory
review &
reporting
Off-balance sheet
exposures

GROUP-WIDE Onsite inspection

Liquidity risks REGULATORY

REQUIREMENTS
Offsite analysis

Diversification/
concentration
Supervisory
reporting
Contagion and
reputational risk

23.11.2 Figure 4 illustrates clear linkages between group risks, group-wide

regulatory requirements and group-wide supervisory assessment
(manifested in onsite inspection, offsite analysis and supervisory
reporting), or the three step approach to designing an appropriate
GSF:
 Identify the group risks that need to be addressed;
 Determine the group-wide regulatory requirements to appropriately
account for these group risks; and
 Design and implement group-wide supervisory assessment procedures
and intervention measures to ensure compliance with the group-wide
regulatory requirements and that the group risks are appropriately
addressed.

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 International Association of Insurance Supervisors
Insurance Core Principle (ICP) material adopted October 2010
(to be included in full set of ICPs to be adopted in 2011)
23.11.3 A GSF can only achieve the ultimate objective as specified in
guidance 23.9.6 and 23.9.7 to the extent that the three step
approach in guidance 23.11.2 is successfully undertaken.
23.11.4 The risks that generally apply to all insurance companies -
insurance, market, credit and operational risks – should be taken
into account, from a group-wide perspective, in group-wide
regulatory requirements and supervisory assessment. In addition,
group-wide regulatory requirements should take into account issues
and specific risks that apply to groups.
23.11.5 The importance of these risks to groups was brought to the forefront
during the financial crisis that began in 2007. It is important that
group-wide supervision effectively addresses these risk exposures.
In particular, due regard should be had for risks that may arise from
the existence of non-regulated entities within and/or connected with
an insurance group. (Refer to the Guidance paper on treatment of
non-regulated entities for further information – insert link to paper).
23.11.6 Additionally, although also applicable within a solo context, risks
arising from the following came to the forefront from a group’s
perspective:
 Systemic aspects;
 Off-balance sheet exposures;
 Liquidity risks;
 Diversification/ concentration; and
 Contagion and reputational risk.
23.11.7 Group-wide supervisory assessment should take into account risk
exposures inherent in groups. The financial crisis that began in 2007
highlighted the potential adverse impact of certain areas (outside of
the commonly assessed insurance, market, credit and operational
risk) that have traditionally not been focused on in any great detail.
As depicted in Figure 4, the primary tools available to supervisors
are the group-wide disclosures and other reporting requirements,
onsite inspections and offsite review. (insert link to standard and
guidance on Disclosure).
23.11.8 Given the evolving nature of group-wide supervision and as
experience is further gained, the GSF will be regularly updated to
ensure that it remains relevant and up-to-date. In this regard, the
GSF will serve as a living catalogue of group-wide supervisory
materials which will reference the other relevant supervisory
materials within the Insurance Core Principles.
23.12 The supervisor requires that insurance groups have reporting systems
in place that adequately meet the supervisory demands.
23.12.1 As noted in 23.11.1, 23.11.2 and 23.11.7, supervisory assessment
tools include onsite inspection, offsite analysis and supervisory
reporting. Accordingly, the GSF should require insurance groups to
have reporting systems that can supply sufficient information for the

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 International Association of Insurance Supervisors
Insurance Core Principle (ICP) material adopted October 2010
(to be included in full set of ICPs to be adopted in 2011)
supervisor to use these tools to appropriately assess the risks
arising from or impacting the group. Where the scope of group-wide
supervision does not correspond to legal or accounting frameworks,
the GSF should make provisions for group reporting that is aligned
with the scope of group-wide supervision.

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