The International Association of Insurance Supervisors (IAIS) is proposing more effective global supervision of insurers.

It has released a discussion paper that looks at what is required to develop a framework of global supervision for “internationally active insurance groups” (IAIGs).

The IAIS says in the discussion paper insurers are becoming more international and are pooling their risks and optimising financial efficiency on a cross-border basis. Regulators have to respond to these changing operational structures despite regulation remaining on a national basis.

The IAIS is proposing to create a common framework for regulating IAIGs to make supervision more reflective of actual business practices.

It also wants to set up the procedures for a more “integrated and international approach” for regulatory supervisors.

The paper says IAIS wants to “foster global convergence of regulatory and supervisory measures and approaches”.

Executive Committee Chairman Peter Braumuller says the creation of the common framework is “one of the most important initiatives” on the association’s agenda.

“It will not only enhance the effectiveness and efficiency of supervision of these groups, but also contribute to our continuing efforts towards stability in insurance markets around the world,” he said.

The common framework is broken up into five modules that set out the process for identifying IAIGs, looks at the structure and business mix of them, corporate governance requirements, activities of supervisory bodies and their minimum requirements for meeting the standards set by the IAIS.      

It has taken the IAIS three years to develop the concept, and comments on the proposal paper will be accepted up to August 31.

A revised version of the concept will then be finalised by July 1, 2013.

This will be followed by testing in the various local jurisdictions to see what the impact will be on the supervision of local insurers.