France
Financial Sector Assessment Program—Detailed Assessments of Observance of Standards and Codes including Banking Supervision, Insurance Regulation, Securities Legislation, Monetary and Financial Policy Transparency, Payments Systems, Securities Settlement, and Anti-Money Laundering and Combating the Financing of Terrorism

The Detailed Assessments of the Observance of Standards and Codes on France reviews compliance with Basel Core Principles for effective banking supervision. The French insurance market is notable for its broad range of distribution channels, which include tied agents, insurance brokers, salaried sales forces, direct writing mutuals, and financial institutions. France fulfills all prerequisites for effective payment clearing and settlement systems. Capital markets are large and sophisticated, with a range of equity, debt, derivative, and mutual fund products available to investors.

Abstract

The Detailed Assessments of the Observance of Standards and Codes on France reviews compliance with Basel Core Principles for effective banking supervision. The French insurance market is notable for its broad range of distribution channels, which include tied agents, insurance brokers, salaried sales forces, direct writing mutuals, and financial institutions. France fulfills all prerequisites for effective payment clearing and settlement systems. Capital markets are large and sophisticated, with a range of equity, debt, derivative, and mutual fund products available to investors.

I. Compliance with the Basel Core PRinciples for Effective Banking Supervision

General

1. This update of the 2001 MAE1 assessment of compliance by France with the Basel Core Principles for Effective Banking Supervision was performed during the 2004 assessment of France in the context of the FSAP. The assessment was conducted from January 28–February 10, 2004. The assessment covered the activities of the key banking regulatory and supervisory bodies in France, in particular the Banque de France (BdF), the Commission Bancaire (CB), the Comité des établissements de Crédit et des Entreprises d’Investissement (CECEI), and the Comité de la Réglementation Bancaire et Financière (CRBF). The updated assessment was prepared by Jan Willem van der Vossen, Monetary and Financial Systems Department (MFD).

Information and methodology used for assessment

2. The 2001 BCP assessment performed by MAE, showed a very high level of compliance with the BCP, with “compliant” gradings for 21 out of 25 BCPs. The four BCPs which had not been graded “compliant” had been graded “largely compliant” or “largely compliant—improvement underway.” The 2004 assessment was prepared on the basis of the Basel Core Principles Methodology, the April 2000 self-assessment by the French authorities, the August 2001 MAE assessment, information provided by the French authorities how the recommendations of the 2001 assessment had been addressed, and the response to the pre-FSAP questionnaire. Furthermore, the mission studied laws and regulations relative to banking regulation and supervision. Discussions were held with representatives of the regulatory and supervisory agencies, and with representatives of the major banks, rating agencies and of the accounting and auditing profession.

3. The mission also consulted the Annual Reports and Official Bulletins of the BdF, the CB, the CECEI, and the Conseil National du Crédit et du Titre (CNCT), websites of the major banking groups, a Cour des Comptes report on the government’s intervention in the financial sector crisis, L’Intervention de l’État dans la Crise du Secteur Financier, a KPMG publication on comparative bank performance data in the EU, rating agency reports, and other sources. In addition, the authorities provided information notes on specific topics, for instance compliance of the French accounting system with IAS, and the institutional structure of the system for financial sector regulation and supervision.

4. The authorities were very open and cooperative, made excellent preparations for the meetings of the mission, and provided helpful post-mission information.

Market structure overview2

5. The French banking system, which has been modernized and restructured over the past two decades, is large, sophisticated, and of international importance. The system is dominated by six vertically integrated universal banks and their subsidiaries. Four of the six are organized on a mutual basis. Further consolidation of the sector could pose a range of challenges, including stability concerns that many banks are “too big to fail.” Two large financial institutions, La Poste and the Caisse des Dépôts et Consignations (CDC), remains in government ownership.

Preconditions for effective banking supervision

Macroeconomic soundness and stability

6. After a slowdown in economic activity during 2002–03, a cyclical recovery has been gathering pace. Inflation has only moderately picked up and ex-post real interest rates have sunk to unusually low levels. Despite slow growth up to mid-2003, the financial situation of the corporate sector has deteriorated only slightly since 2000 and, except for a few large companies, corporate leverage is generally low. Likewise, households’ debt levels relative to incomes and assets are comparatively low (albeit rising), and savings rates are high. However, low interest rates and rising prices may induce households to take out larger mortgage loans, which may impact on their future financial position. Equity prices remain below their 2000 highs, despite the recent recovery, but some investors enjoy offsetting gains on bonds. Commercial real estate prices have remained stable following the early-1990s boom-bust cycle.

Public infrastructure and institutional arrangements for supervision

7. The legal and regulatory framework for banking supervision in France is clear, easily accessible and updated periodically (Principle 1(1)). All banking and financial laws are codified in the Code Monétaire et Financier (COMOFI). The COMOFI also incorporates new legislation on the Fonds de Garantie des Dépôts (FGD), and on the new Autorité des Marchés Financiers (AMF), which regulates and supervises securities operations, including banks’ asset management activities for third parties. The main banking and accounting regulations are collected in the Recueil des Textes Réglementaires published by the CRBF.

8. The legal framework to conduct banking business is also well developed, with clear and concise legislation. The legal profession and the judiciary are well trained and have a strong understanding of financial and banking issues. Supervisory staff are well versed in the application of financial sector legislation. Rules on contracts and contract enforcement, as well as establishment and foreclosure of security interests are well developed, although legal procedures are lengthy. The accounting and auditing professions are well regulated, and subject to rigorous training and entry requirements. They are subject to regulation and codes of conduct issued by the Haut Conseil du Commissariat aux Comptes (HCCC) and the Compagnie Nationale des Commissaires aux Comtes (CNCC).

9. France has separate supervisory institutions for the main financial sectors: banking, insurance and securities. Arrangements have been put in place to ensure adequate coordination between these authorities. The CB, the CRBF, the CECEI, the Commission de Contrôle des Assurances, Mutuelles et Institutions de Prévoyance (CCAMIP) and the AMF are the supervisory and regulatory agencies for, respectively, the banking system, insurance, and securities industries, this far latter including banks’ asset management for third parties. Later in 2004, the CRBF, which issued banking regulations, subject to approval by the minister in charge of the economy (MoE), will close to exist. Henceforth, the MoE will issue regulations directly under his own name, after consultation of the Comité Consultatif pour la Législation et la Réglementation Financieres (CCLRF).

10. Thus, financial sector oversight is fundamentally set up as a matrix, with a separate column for each of the main financial sectors of banking, securities and insurance, each with separate layers for regulatory, licensing and supervisory functions. The three columns are coordinated through joint bodies for cooperation, coordination and exchange of information and cross–membership in the oversight boards of the supervisory authorities. The legal provisions on financial sector regulation and supervision are incorporated in the COMOFI, except those for the insurance sector, which are laid down in the Code des Assurances.

11. This structure, while it may be seen as complex, is internally consistent and effective on a day-to-day basis. The following are examples of how coordination and cooperation are structured between the agencies:

  • a) Joint working groups of the CB and the Commission des Opérations de Bourse (COB) (precursor of the AMF) have issued common recommendations on measures to deal with transactions that have failed to clear (are in suspens); a common recommendation on financial information concerning credit risk, and a common recommendation on asset de-recognition and de-consolidation;

  • b) The CB and the COB (AMF) have jointly prepared restrictions on the use of credit derivatives by unit trusts, rules on large exposures for unit trusts, and have cooperated on many practical issues;

  • c) Annually, more than 50 bilateral or multilateral meetings take place between the CECEI, the CB, CCAMIP and the AMF, as well as approximately 100 exchanges of letters between the CB ad the COB (AMF);

12. Cooperation and coordination between the BdF, CB, the AMF and CCAMIP also takes place through their membership in the CACESF, chaired by the MoE.

13. Cooperation between the CCAMIP and the CB is formalized in a charter signed in October 2001. Cooperation extends to mutual training, exchange of staff, exchange of information, performance of joint studies, coordinated on-site inspections of institutions that combine banking and insurance activities. Cooperation between the CB and the CCAMIP has been strengthened through the Financial Security Act of August 2003. Joint meetings between the CCAMIP and the CB take place as needed, but at least twice a year. The CB chair is member of the CCAMIP and vice versa.

14. Coordination between the CB and the AMF is supported by BdF membership in both bodies. Off-site supervisors of both bodies meet on a monthly basis, on-site staff bi-monthly. Information is also exchanged ad-hoc. Participation of CB inspectors in AMF inspection teams is based on a 1999 agreement between the CB and the CMF (which was merged with the COB in the AMF). The AMF retains responsibility for the follow-up to these inspections.

15. The BdF remains the pivotal institution in the general governance and day-to-day operations of the CB and the CECEI. It provides their staff and other resources. The two institutions meet on a monthly basis to discuss individual cases. The CB, CECEI and AMF also meet with the same frequency to discuss general as well as institution-specific issues. The staffs of the three bodies are in day-to-day contact on for instance licensing issues, changes in shareholdings, and assessment of business plans. Cooperation between the insurance and banking supervisory agencies takes place through dedicated working groups, joint on-site inspections and regular meetings.

16. The authorities stress that the CB is the responsible agency in a crisis involving an individual banking institution. Nevertheless, in view of the complex institutional arrangements, it could be useful to lay down an explicit protocol for crisis-management involving more than one supervisory body, as speed of action will be essential, and established procedures may need to be cut short.

17. Independence of banking supervision, with an autonomous board, is generally adequate (Principle 1(2)), although the presence of the Director of the Trésor on the board of the CB could raise the issue of independence from the MINEFI. Furthermore, the presence of industry representatives on the Boards of the CECEI and the AMF raises the issue of a potential conflict of interest for these members when issues are discussed that are relevant to their business interests. The authorities stress however, that (i) the rules of procedure require that industry representatives recuse themselves when a potential conflict of interest arises; (ii) members are under strict secrecy obligations; (iii) industry representatives can provide valuable input; and (iv) this structure promotes acceptance of the supervisors’ work by the industry.

18. The CB and the CECEI are clearly not independent from the BdF, which controls its resources and whose governor chairs its board. However, given (i) the independence of the BdF itself; (ii) the absence of obvious conflicts of interest with the prudential objectives of the CB and the CECEI (particularly in view of the centralization of monetary policy decisions at the European Central Bank), the linkages between the BdF and the CB do not appear to be a matter for serious concern. The staff of the CB, particularly on-site, is still somewhat tight in view of the size of the French banking system, but it is steadily growing. The professionalism of the CB and CECEI staff is well-recognized. The legal protection of supervisors (Principle 1(5)), although not explicit in statute, is a well recognized tenet of administrative law in France—and other EU countries—and is considered satisfactory.

Market discipline and governance

19. The CRBF’s and CNC’s accounting rules and regulations may be considered to be generally appropriate and in line with European and international standards. Since the assessment in 2001, the authorities have taken a number of actions to enhance convergence between IAS and French accounting standards (See also description of BCP 21). Important reforms have already been enacted through the 1999 SFSA and further improvements aiming at better disclosure in several key areas have been made. A more systematic approach to and more disclosure of nonperforming loans (NPLs) have been introduced, facilitating comparisons of risk exposure and management across banks. Introduction of the Basel II framework in all EU countries will further harmonize treatment of credit risk in France with other EU countries. The credit institutions should sometimes adopt more systematically open and timely communication policies as regards significant difficulties or relevant external events that affect their risk exposure.

Problem resolution

20. The good record of the French supervisory system for early detection of troubled institutions is based, in part, on effective analytical and micro-monitoring capabilities (Principle 16). Particularly impressive are the CB’s early warning system (SAABA) and the CAMELS-type bank-by-bank assessment and rating system (ORAP), which make extensive use of available databases, including the BdF’s voluminous database on enterprises.

21. The CB has an adequate enforcement capacity, derived from well designed coordination arrangements between on-site and off-site supervisors and with other financial sector supervisory bodies, a flexible and comprehensive set of notification and corrective action procedures, effective follow-up, and sound legal and other enforcement powers (Principles 1(4), (16), and 22). As regards bank exit policies, substantial progress has been achieved with the reform of the deposit insurance system in defining more effective bank resolution procedures and allowing for intervention in banks by the FGD at the request of the CB.

22. Appeals against the decisions of the CB and the CECEI do not in principle suspend implementation of the decisions, unless the institution can show to the court that the decision will most probably be overturned, or if implemented, would cause irreparable harm to the institution involved, and should therefore not be implemented pending a final court decision. In theory, this can hamper efficient implementation of supervisory decisions. A system in which the implementation can go forward, but the supervisor might afterwards be held liable for damages could address this problem. In actual practice, the possibility to obtain such a suspension of implementation has not been successfully applied.

23. Bank governance needs to be kept under close review, especially with regard to the large mutualist organizations, which are seen to be lesser or greater degree expanding their activities and changing their corporate structures in order to make better use of their accumulated cooperative capital bases. They are embarking on a path of change and will need to carefully manage that process.

Safety net

24. The FGD was established by the SFSA of June 25, 1999, which is codified in the COMOFI, under Articles L.312-4 through L.312-18. The FGD replaces the previously existing separate guarantee funds. The COMOFI sets out that the FGD guarantees deposits and other nominally repayable funds deposited in any registered credit institution in France. The FGD’s legal personality, activation, scope, governance, funding, intervention powers, its right to sue managers of the institution, as well as an enabling clause for the Minister in charge of the economy to issue more detailed regulations, are also clearly set out in the COMOFI. Depositors in banks are protected to a maximum of EUR 70,000 per customer, per bank, through the FGD. Depositors wishing to achieve full coverage of their deposits, should these be larger than EUR 70,000, may spread their deposits over several banks, limiting their deposit in each bank to EUR 70,000. Regulations 99-05, 99-06 and 99-07 of the CRBF provide more detail on the functioning of the FGD.

25. Furthermore, banks have access on their own initiative to the Eurosystem marginal lending facility to obtain overnight liquidity against collateral of eligible assets.

Principle-by-principle assessment

Table 1.

Detailed Assessment of Compliance of the Basel Core Principles

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Table 2.

Summary Compliance of the Basel Core Principles

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C: Compliant.

LC: Largely compliant.

MNC: Materially non-compliant.

NC: Non-compliant.

NA: Not applicable.

Recommended action plan and authorities’ response to the assessment

Recommended action plan

26. The system in France for banking regulation and supervision is of high quality, and only one BCP has been assessed largely compliant and not fully compliant. However, notwithstanding this conclusion, the authorities might usefully consider taking additional steps to address two issues which the mission wishes to bring to the attention of the authorities.

Table 3.

Recommended Action Plan to Improve Compliance of the Basel Core Principles

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Authorities’ response to the assessment

27. The authorities are broadly in agreement with the assessment.

II. Observance of the Iais Insurance Core Principles

General

28. This assessment examines France’s observance of the International Association of Insurance Supervisors (IAIS) Insurance Core Principles (ICP) on the effective supervision of the insurance sector. The assessment was performed according to the new October 2003 ICP methodology by a two person team as part of the IMF FSAP.3

Information and methodology used for assessment

29. The assessment of observance of the IAIS Core Principles involved the review of: (i) an extensive self-assessment prepared in 2000 prepared by the former Commission de Contrôle des Assurances (CCA) based on the old methodology; (ii) comparison with the Core Principles and the Core Principles Methodology; and (iii) a review of the relevant laws governing the insurance sector in France. The legal basis regulating insurance is the Code des Assurances (as amended), which is supported by numerous decrees and implementation regulations, and the recent Loi de sécurité financière (Financial Security Law, LSF).

30. In addition, through the period of January 29–February 11, 2004, a series of meetings and discussions were held in France with officials from the insurance supervisory authority,4 the MINEFI, the BdF, the CB, the insurance industry associations (Fédération francaise des sociétés d’assurance–FFSA and the Groupement des Entreprises Mutuelles d’Assurances–GEMA), the actuaries association (Institut des Actuaires), private insurance companies, associations of intermediaries, auditors (the Compagnie Nationale des Comm issaires aux Comptes–CNCC), and other financial institutions. On this basis, the assessors attempted as far as possible to evaluate whether the legal framework is implemented faithfully and effectively.

31. The supervisory staff at the insurance supervisory authority and other concerned agencies cooperated fully with the assessment, providing answers to an extensive questionnaire, preparing the self assessments against the IAIS Core Principles, meeting additional requests for information, and being available for a wide variety of meetings. In addition, the insurance supervisory authority and MINEFI staff assisted with logistical arrangements for the meetings with industry bodies and companies, for which the mission expresses its gratitude.

32. The assessment was undertaken during a period of transition. On the one hand, the ICP are relatively new. The old version dating from 2000 was revised in 2003.

33. On the other hand, the French supervisory environment has been significantly modified by the Financial Security Law of August 1, 2003. This legislation created the joint insurance supervision body, called Commission de Contrôle des Assurances, des Mutuelles et des Institutions de Prévoyance (CCAMIP), as the result of the merger of the CCA, responsible for the supervision of companies regulated by the old insurance code, and the Commission de Contrôle des Mutuelles et des Institutions de Prévoyance (CCMIP), responsible for the supervision of certain mutual insurers. The provisions of the law also gave financial independence to the CCAMIP, strengthened coordination with the banking sector supervisors, and extended the powers of the supervisory authorities to request and receive information from supervised entities and auditors. The implementation orders (décrets d’application) for the new law were under review by the Conseil d’Etat at the time of the assessment; the transition period ended as of July 2004 with the publication of outstanding orders.

Institutional and macro prudential setting—overview

34. The French insurance sector is large and of systemic importance. With a 5 percent market share of gross premiums in the OECD in 2001, France’s insurance sector was ranked the fifth largest in the world and the third largest in Europe.5 In terms of density (premiums per capita), France ranks slightly lower at the tenth position in the OECD. With an insurance penetration ratio (premiums as a percentage of GDP) slightly over 10 percent, France ranks eighth in the OECD.

35. The French insurance industry includes a variety of insurance companies, including life, and health and accident (henceforth referred to as “mixed”) (126), nonlife (295) and reinsurance (33).6 In 2002, the French insurance sector was largely dominated by the life and mixed sectors, accounting for over 80 percent of total assets (30 percent for life and 53 percent for mixed). Non-life insurance represented only 14 percent of total assets. Reinsurance plays only a minor role, accounting for 4 percent of total insurance assets.7 By legal form, stock companies accounted for 80 percent of premium income, mutual insurance companies 11 percent, public-owned institutions 9 percent, and the branches of foreign companies (outside the EEA) less than 0.1 percent.8

36. The insurance industry seems to be supported by a healthy level of competition. Market concentration is higher in the life insurance sector, where at end 2002 the three (10) largest insurance companies represented 29 percent (60 percent) of total assets. In nonlife, the three (10) largest companies represented 22 percent (45 percent) of total assets. A notable feature of the industry is the prevalence of bancassurance: a large minority (by assets) of insurance companies are subsidiaries of banks, which also offer policies from nonsubsidiaries. The French insurance market is notable for its broad range of distribution channels, which include tied agents, insurance brokers, salaried sales forces (as in the case of bancassurance), direct writing mutuals, and financial institutions.

37. In life sector, the most common product is a type of savings product (assurance à capital différé avec contre-assurance en cas de décès or “mixed capital insurance” product), accounting for almost 65 percent of total life premium income. This product is subsequently paid out in the form of a lump-sum benefit or multiple payment if the insured dies or outlives the term of the policy. This product can be taken out directly by the individuals or through an employer or association (group policies account for 7 percent of pure endowment premium income). Such policies have a guaranteed rate of return which is used to calculate technical provisions. The second largest type of life insurance policies (representing 15 percent of total life premium income) is a unit-linked contract. This type of policy is expressed in the units of an investment vehicle, such as shares of a mutual fund or a real-estate partnership. Since the contract benefits fluctuate with the market values of the underlying investment instruments, the investment risk is entirely borne by the policyholders, unless there are linked to some minimum guarantees.

38. The regulatory framework for life insurance companies relies on three pillars: (i) solvency requirements (approximately 4 percent of total mathematical provisions for endowment products and 1 percent for unit-linked contracts);9(ii) regulations on the measurement of liabilities (i.e., technical provisions); and (iii) regulations governing investment policies (including conservative accounting principles applied to asset valuation). At end-2002, the solvency margin (including unrealized capital gains) was estimated at 9.3 percent of provisions, or 2.4 times the required minimum. Non-life insurance companies are required to have a minimum regulatory ratio equal to 18 percent of annual premiums (16 percent for large companies), or 26 percent of average claims paid out in the preceding three years (23 percent for large companies), whichever amount is higher.10 At end-2002, the solvency margin (including unrealized capital gains) was estimated at 39.3 percent of provisions, or 4.8 times the required minimum.11 In addition, the CCAMIP is promoting a sound level of asset-liability management expertise on the industry-wide basis. Since 2001, insurers are required to conduct periodically a series of stress tests, aimed at monitoring the ability of insurance companies to model and anticipate the consequences of various financial market shocks (such as movements in interest rates, or equity or real estate prices) on their asset-liability match.

39. Overall, the condition of the French insurance industry suggests that systemic vulnerabilities are well contained. The sector seems to have demonstrated its resilience in the face of a number of significant shocks in recent years (including, among others, a significant fall in international equity prices in 2001–2003, historically low interest rates, and international and national natural catastrophes, including September 2001 and major storms or flooding in France in 1999 and 2000).

40. Sources of stability include: (i) the ability of the life sector to reduce progressively the level of guaranteed interest rates (to zero percent for most new contracts) and shorten the contract duration, in an effort to reduce interest rate risks borne by the insurers; (ii) greater product mix diversification with unit-linked products, where the investment risk is fully borne by the policyholders (even after the recent poor equity market performance, unit-linked products continue to represent 18 percent of life and mixed insurance premiums); (iii) a conservative investment portfolio, with over three quarter of total assets invested in fixed-income instruments (in life, equity represents only 12 percent of total assets and real estate less than 5 percent, leaving the remaining 84 percent invested in fixed-term instruments; this asset composition has helped shield the French insurance sector from the consequences of the recent fall in international equity prices); (iv) despite the presence of large bancassurance groups, limited risk transfer between the banking and insurance sectors; and (v) a relatively small reinsurance activity, accounting for only 3 percent of total assets in the French insurance sector.

41. The insurance industry is facing a number of challenges. These include: (i) the demographic trend (longer life expectancy and decline in working population), which creates concerns about financial sustainability of the currently fully state-funded pension and medical plans; (ii) the up-coming implementation of the new International Accounting Standards (IAS) norms in 2005, which expose the insurance industry to vulnerable accounting risks; and (iii) a possible sharp and sustained increase in interest rates, which could generate a wave of contract repurchases, which in turn would force insurance companies to sell some of their assets (fixed-income instruments) at loss-making values in order to pay out the surrender values. However, the authorities seem aware of these challenges and are considering how to take preemptive measures, including the promotion of a new generation of private retirement products or ensuring a sound and sophisticated system of asset-liability management at the industry-wide level.

General preconditions for effective insurance supervision

42. The supervision of insurance companies in France is based on the EU Directives and French insurance law, ordinances, codes and circulars. The legal requirements governing insurance companies originate in both company law and insurance law. In France, the regulation of insurance falls under the jurisdiction of the MoE, while the supervision is under the responsibility of the CCAMIP and the CEA.

43. The legal system in France operates effectively. The auditing and accounting professions in France are well developed and follow best international practices. In the case of large companies, the accuracy of the financial statements must be confirmed simultaneously by two sets of external auditors. The auditing and accounting rules applicable to insurance companies generally comply with international standards. Further harmonization will be achieved in 2005 when the whole EU area will implement IAS. The actuarial profession is large and well-developed in France.

44. The French economy is well large, well diversified, and generally relatively stable in both real and nominal terms. These conditions not only contribute to the growth of the insurance sector, but also facilitate effective supervision.

Principle-by-principle assessment

45. The legal, regulatory and supervisory framework observes a large majority of the essential criteria of the IAIS Principles Methodology. The assessment reveals that most of the 28 ICP of the IAIS are observed. ICP 9, 10, 17 and 18 are largely observed, and ICP 3, 24 and 28 are partly observed.

46. The level of observance for each principle reflects the assessments of the essential criteria established by the IAIS. A principle is considered “observed” whenever all the essential criteria are considered to be observed or when all the essential criteria are observed except for a number that are considered not applicable. For a criterion to be considered “observed,” it is usually necessary that the authority has the legal authority to perform its tasks and that it exercises this authority to a satisfactory standard and ensures that requirements are implemented. The existence of a power in the law is insufficient for full observance to be recorded against a criterion except where the criterion is specifically limited in this respect. In the event that the supervisor has a history of using a practice for which it has no explicit legal authority, the assessment may be considered as “observed” if the practice is substantiated as common and undisputed.

47. A principle is considered to be “not applicable” when the essential criteria are considered to be “not applicable.” A criterion would be considered ‘not applicable’ whenever the criterion does not apply given the structural, legal and institutional features of a jurisdiction.

48. For a principle to be considered “largely observed,” it is necessary that only minor shortcomings exist which do not raise any concerns about the authority’s ability to achieve full observance with the principle. A principle will be considered “partly observed” whenever, despite progress, the shortcomings are sufficient to raise doubts about the authority’s ability to achieve observance. A principle will be considered “not observed” whenever no substantive progress toward observance has been achieved.

Table 4.

Detailed Assessment of Observance of the IAIS Insurance Core Principles

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