The list of global insurers that are considered important enough to require “living wills” is growing, with the Financial Stability Board (FSB) adding four firms in its latest annual update of that list, and proposing new guidance for deciding which companies make the list.
The FSB released its updated list of critical insurers that are subject to resolution planning standards, which grew to 17 names, up from 13 last year.
Three of four new additions are based in Switzerland — Zurich Insurance Group Ltd., Swiss Re Ltd., and Swiss Life Holding Ltd. — and it also added Dutch insurer Athora Netherlands N.V. There are still no Canadian firms on the list, which includes five from the U.K., three in the U.S., eight European firms and one from Australia.
At the same time, the FSB also launched a consultation on proposed new guidance for assessing insurers for inclusion on the list. It also reaffirmed its past decision to scrap the process for identifying global systemically-important insurers (G-SIIs) that mimicked its approach to systemically-important banks. Instead, it will rely on assessments that follow the framework established by the global standard setter for the insurance sector, the International Association of Insurance Supervisors (IAIS).
In the wake of the global financial crisis, the FSB introduced a process for identifying systemically-important financial institutions, and subjecting those firms to added regulatory scrutiny and requirements. The aim was to combat the systemic risks and moral hazard risk that can arise when firms are too big, or too interconnected, to be allowed to fail.
However, in 2022, the FSB decided to drop that process for insurers, and to use the IAIS framework for evaluating systemic risk in the insurance sector, and to start publishing an annual list of insurers that are subject to resolution planning requirements (the first list was released in 2024).
As a result, these decisions are now made at the national level, and don’t necessarily imply that an insurer is systemically important, it noted.
“The draft guidance calls for authorities to evaluate an insurer’s nature, scale, complexity, substitutability, cross-border activities and interconnectedness,” the FSB said.
The draft guidance also sets out specific scenarios when recovery and resolution planning standards should always apply, it noted, “such as when an insurer provides critical functions that cannot be easily substituted or when its failure could significantly impact financial stability or the real economy.”
The FSB said that it continues to consult with the IAIS on “resolvability monitoring and public reporting for the insurance sector,” and the IAIS also launched its own consultation on guidance for recovery and resolution.