Proposals by the International Association of Insurance Supervisors (IAIS)  target insurers deemed too big to fail and recommend that these insurers cut systemic risks, increase capital buffers and improve their liquidity planning to reduce the impact on economic activity should they collapse.

The pubic consultation document published on the Basel, a Switzerland-based watchdog website, also included recommended measures for more intensive supervision, provisions for effective resolution regimes and the separation of non-traditional and non-insurance activities.

The IAIS and the Financial Stability Board (FSB) are seeking to prevent a repeat of the turmoil that followed the collapse of Lehman Brothers Holdings Inc. and bailout of American International Group Inc. (AIG).

The FSB, guided by the IAIS, will decide in April which insurers are too big to fail based on criteria including size, global activity and the amount of non- insurance businesses they have.  The FSB has asked insurers and other interested parties to comments on the proposed rules by December 16, 2012.

(Photo credited to: iaisweb.org)

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© Connelly, Carlisle, Fields & Nichols 2012