FSB Applies Key Attributes to Insurers

9 September 2013
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Key takeaways:

  • On August 12, 2013, the Financial Stability Board (the “FSB”) issued proposed guidance (the “Proposed Guidance”) on the application of the Key Attributes of Effective Resolution Regimes for Financial Institutions (the “Key Attributes”) to non-bank financial institutions, including insurers. Comments on the Proposed Guidance are due to the FSB by October 15, 2013.
  • Consistent with the analytical approach of the FSB and the International Association of Insurance Supervisors’ (the “IAIS”) for the designation and regulation of global systemically important insurers (“G-SIIs”), this Proposed Guidance focuses on perceived risks arising from the resolution of insurance groups engaged in “non-traditional” (“NT”) and non-insurance (“NI”) activities.
  • Notably, several provisions of the Proposed Guidance significantly depart from the generally-existing state insurance resolution regimes in the United States, including inserting a bridge bank concept into the insurance resolution process, allowing a receiver unilaterally to change policy liabilities, and granting authority to separate policyholders into different sub-classes and treating these subclasses differently in resolution. The Proposed Guidance also provides details about how systemically significant insurers, in particular insurers who have been designated as G-SIIs by the FSB, will need to prepare their recovery and resolution plans (“RRPs”), mandated in the Policy Measures document released by the FSB on July 18, 2013.