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Business and Economics > Insurance

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Cover IMF Staff Country Reports
Republic of Korea: Financial Sector Assessment Program-Technical Note-Systemic Risk Analysis, Financial Sector Stress Testing, and an Assessment of Demographic Shift in Korea
International Monetary Fund. Monetary and Capital Markets Department
This note presents the systemic risk analysis conducted for the Republic of Korea in the course of the 2019 Korea FSAP. It comprises a forward-looking solvency analysis for banks, insurers, and pension funds, a liquidity stress test for banks, and an assessment of network and interconnectedness for a wide range of financial sector entities and their ties to the real economy. Various structural characteristics of Korea’s economy and its financial system informed the features and focus for its forward-looking risk analysis. They include Korea’s strong export orientation, limited diversification, and its key role as a node in regional and international supply chains. Korea’s financial system has grown by 40 percentage points of GDP since 2013, enhancing the importance of a deep financial sector analysis as conducted through the FSAP. Mortgage insurance schemes are widely used—which was reflected in the way the risk assessment for banks was conducted. Korea’s life and non-life insurance sector is large, highly concentrated and saturated. Fintech developments keep accelerating, in terms of its Open Banking system and e-money providers. Demographic developments in Korea are among the most adverse world-wide, implying a continuous drag on demand, downward pressure on interest rates, financial firms’ income, and hence their capitalization unless they will be altering their business models.
Keywords:
ISCR; CR; financial system; sensitivity analysis; balance sheet; banking system; central bank; credit risk; housing market; return on assets; sovereign bond; bond yield; real GDP; market structure; solvency analysis; Insurance; Loans; Stress testing; Commercial banks; Insurance companies; Global
Cover IMF Staff Country Reports
Thailand: Financial Sector Assessment Program-Detailed Assessment of Observance-Insurance Core Principles
International Monetary Fund. Monetary and Capital Markets Department
This Detailed Assessment of Observance on Insurance Core Principles on Thailand discusses that the government of Thailand has made a concerted effort to develop the insurance sector. The government has implemented a series of insurance development plans toward this end. Some significant regulatory and supervisory challenges remain, however, if Thailand is to continue to meet the pressures of a changing market and to continue to build the trust on which future growth depends. Consideration should be given to vesting more supervisory authority for key supervisory decisions with the Commission rather than with the Minister and Cabinet. Vesting authority with the Commission will help to ensure that the insurance supervisor has adequate powers to meet the objectives of insurance supervision. With respect to winding up and exit from the market, the insurance legislation should be amended to clearly establish a point at which it is no longer permissible for a troubled insurer to continue in business.
Keywords:
ISCR; CR; risk management; state enterprise; corporate governance; insurance coverage; steering committee; board of directors; interest rate; risk assessment; credit risk; senior management; limited company; risk capital; independent auditor; cash flow; preference shares; Insurance companies; Insurance; Internal controls; Capital adequacy requirements; Auditing; Global
Cover IMF Staff Country Reports
Indonesia: Financial Sector Assessment Program-Detailed Assessment of Observance—Insurance Core Principles
International Monetary Fund. Monetary and Capital Markets Department
This paper reviews observance of Insurance Core Principles in Indonesia. Insurance regulation and supervision have been remarkably improved since the establishment of the Financial Services Authority (OJK) and the enactment of the new Insurance Law. However, the assessment has identified a significant number of shortfalls in observance with the Insurance Core Principles. Some deficiencies are owing to the lack of effective group regulation and supervision of insurance groups. Although OJK has implemented regulations related with risk management and group capital, intragroup transactions are not well taken into account. It is recommended that OJK should improve the effectiveness of supervision. Thematic reviews of reserving practices will encourage more conservative reserving.
Keywords:
ISCR; CR; risk management; board of directors; reinsurance company; bankruptcy petition; discount rate; financial system; legal power; OJK revise; cash flow; Insurance companies; Insurance; Capital adequacy requirements; Global
Cover IMF Staff Country Reports
Belgium: Financial System Stability Assessment-Technical Note-Banking, Insurance, and Financial Conglomerate Supervision
International Monetary Fund. Monetary and Capital Markets Department
This Technical Note analyzes the key aspects of the regulatory and supervisory regime of banks, insurance companies and financial conglomerates (FCs) in Belgium. The regulatory framework for Belgian financial institutions has been strengthened substantially since the 2013 Financial Sector Assessment Program. Notably, new national banking and insurance laws have been issued, the Bank Recovery and Resolution Directive and amendments to Financial Conglomerate Directive have been transposed, Solvency II has been implemented, and the National Bank of Belgium has been designated as the macroprudential authority. This has improved significantly the regulatory framework and broadened its scope to better address the challenges posed by FCs. Financial sector supervision has also been upgraded markedly.
Keywords:
ISCR; CR; risk management; banking group; interest rate; mortgage loan; credit risk; capital ratio; group transaction; Insurance companies; Insurance; Solvency; Credit; Capital adequacy requirements; Global; Europe
Cover IMF Staff Country Reports
Canada: Financial Sector Assessment Program-Impact on the Insurance Sector of a Low Interest Rate Environment-Technical Note
International Monetary Fund. Monetary and Capital Markets Department
This paper discusses Canada’s Financial Sector Assessment Program (FSAP) impact on the insurance sector of a low interest rate environment. It highlights that actuarial standards on valuation of liabilities require that assumed reinvestment rates take increasing account of current market rates that led to higher liabilities as low rates persisted. The note outlines the effect of Canadian accounting and actuarial standards that further increases in liabilities need to be recognized in the short term. Policy measures have been undertaken by Office of the Superintendent of Financial Institutions (OSFI) in the banking sector to address broader risks.
Keywords:
ISCR; CR; firm; interest rate; return; product; life company; company report; rate change; reinvestment rate; companies' market shares; design regulation; companies' inability; interest rate scenario; company's liability; wealth management products; Insurance; Insurance companies; Personal income; Accounting standards; Capital adequacy requirements; Europe; North America; Asia and Pacific; Global
Cover IMF Staff Country Reports
Canada: Financial Sector Assessment Program-Insurance Core Principles-Detailed Assessment of Observance
International Monetary Fund. Monetary and Capital Markets Department
This Detailed Assessment report, a part of the 2013 Financial Sector Assessment Program (FSAP) of Canada, assesses Canada’s regulatory regime and supervisory practices against the international standards. The IMF report suggests that the Office of the Superintendent of Financial Institutions (OSFI) should be empowered to take supervisory measures at the level of the holding company. It highlights that while OSFI requires Federally Regulated Insurers (FRI) FRIs to develop internal capital targets, requirements to develop an Own Risk and Solvency Assessment are scheduled to be implemented in 2014.
Keywords:
ISCR; CR; holding company; risk management; insurance group; mortgage insurance; corporate governance; life insurance; insurance coverage; automobile insurance; line of business; Insurance companies; Insurance; Corporate governance; Legal support in revenue administration; Capital adequacy requirements; Global; Europe; Asia and Pacific
Cover IMF Staff Country Reports
Nigeria: Publication of Financial Sector Assessment Program Documentation––Detailed Assessment of Observance of Insurance Core Principles
International Monetary Fund. African Dept.
Nigeria undertook a Financial Sector Assessment Program (FSAP), which included a review of the structure of Nigeria’s insurance market and the supervisory framework. The assessment was benchmarked against the Insurance Core Principles (ICPs) issued by the International Association of Insurance Supervisors (IAISs). It is advised that the National Insurance Commission (NAICOM) of Nigeria can expand the objective to include the creation of a fair, safe, and stable insurance sector for the benefit and protection of policyholders.
Keywords:
ISCR; CR; risk management; line of business; contingency reserve; NAICOM approval; margin requirement; corporate governance; business plan; independent director; market share; holding company; beneficial owner; NAICOM staff; Insurance companies; Insurance; Capital adequacy requirements; Anti-money laundering and combating the financing of terrorism (AML/CFT); Solvency; Africa; West Africa
Cover IMF Staff Country Reports
Belgium: Technical Note on Financial Conglomerate Supervision
International Monetary Fund. European Dept.
Belgian financial conglomerates (FCs) remained important players in the Belgian financial sector, despite significant restructuring following the global financial crisis. FCs operated in multiple streams of the financial sector, especially in banking and insurance. Owing to their economic reach and use of regulated and unregulated entities across sectoral boundaries, FCs presented a challenge for sector-specific supervisory oversight. The Executive Board suggested a pragmatic supervisory approach, which needs to be streamlined and applied more uniformly to contain FC-specific risks.
Keywords:
ISCR; CR; parent company; risk management; group transaction; risk concentration; risk profile; FC supervision; supervisory framework; FC legislation; NBB expectation; FCS draw; group level; bancassurance group; group risk; Insurance companies; Capital adequacy requirements; Insurance; Financial conglomerates; Financial sector; Global
Cover IMF Staff Country Reports
Malaysia: Publication of Financial Sector Assessment Program Documentation—Detailed Assessment of Observance of Insurance Core Principles
International Monetary Fund. Monetary and Capital Markets Department
This report is an analysis of the insurance core principles of Malaysia. This assessment gives a clear understanding of the regulatory and supervisory framework of the insurance sector of Malaysia. Bank Negara Malaysia (BNM) is the best insurance regulator in this region. Six percent of the financial sector accounts for the insurance sector. The assessment did not reveal any current potential sources of significant risk to the Malaysian financial stability from its insurance industry. The Executive Board expects further enhancement for an effective insurance sector.
Keywords:
ISCR; CR; risk management; BNM supervisor; takaful operator; BNM guideline; corporate governance; BNM staff; BNM guidance; Insurance companies; Insurance; Capital adequacy requirements; Corporate governance; Anti-money laundering and combating the financing of terrorism (AML/CFT); Global
Cover IMF Staff Country Reports
Australia: Insurance Core Principles—Detailed Assessment of Observance
International Monetary Fund
The insurance industry in Australia has weathered the global financial crisis well and was resilient to the catastrophic events in 2010/11. The insurance industry is mature but relatively small compared to the banking sector. Assets held by insurers represented only about 8 percent of the financial system total assets as at end-2011. Since 2007, the insurance market has been consolidating steadily as the total number of players fell from 190 to 172 although branches of foreign-owned general insurers rose from 36 to 43. The industry was comprised of 24 life insurers, 108 general insurers, 19 reinsurers, 7 captive general insurers and 14 friendly societies as at end-June 2011.
Keywords:
ISCR; CR; APRA member; business plan; capital base; financial system; holding company; APRA staff; corporate governance; supervision activity; Insurance companies; Insurance; Capital adequacy requirements; Solvency; Global