International Insurance Regulatory Issues 10 th Annual Insurance

International Insurance Regulatory Issues 10 th Annual Insurance Public Policy Summit “Confronting New Challenges in U. S. and International Regulation” Andrés Portilla Director, Regulatory Affairs Department March 12, 2014

List of Current IIF Insurance Members . Currently the IIF has 19 insurance members headquartered in 10 countries, including all 9 G-SIIs designated in July 2013: • • • Swiss Re Zurich Insurance Group Allianz SE Prudential Financial AIG Met. Life Generali AXA Group Ping An Insurance Principal Financial Group Institute of International Finance • • • Prudential plc Manulife Financial Reaseguradora Patria Aflac China Taiping Insurance Group Co. Aegon N. V. China Life Insurance (Group) Aviva plc Mass. Mutual Life Insurance Company

The Global Framework G 20 Countries: Argentina, Australia, Brazil, Canada, China, France, Germany, India, Indonesia, Italy, Japan, the Republic of Korea, Mexico, Russia, Saudi Arabia, South Africa, Turkey, the United Kingdom, EEUU and the European Union G 20 FSB (Financial Stability Board) BCBS (Basel Committee on Banking Supervision) Institute of International Finance IOSCO (International Organization of Securities Commissions) IAIS (International Association of Insurance Supervisors)

International Regulatory Agenda • One key objective: to develop a harmonized, globally consistent regulatory framework for internationally active insurance groups • Two key players: Financial Stability Board (FSB) and the IAIS • Three main projects: • • • Basic Capital Requirement (BCR) Com. Frame (Common Framework for the Supervision of IAIGs) Global Insurance Capital Standard (ICS) Institute of International Finance

Global Insurance Regulatory Framework Overview ICPs Com. Frame expands on ICPs All Insurers Com. Frame Capital Adequacy Component of Com. Frame Step 3: ICS (to be developed by end of 2016) Step 2: HLA(to be developed by end of 2015) Step 1: BCR (to be developed by end of 2014) IAIGs G-SIIs Recovery and Resolution G-SII Policy Measures Enhance Groupwide Supervision Apply to G-SII BCR HLA ICS � � � Apply to IAIG TBD � � � � � Apply to All Other Insurers Institute of International Finance Com. Frame ICPs

Global Systemically Important Insurers(G-SIIs)Policy Measures Overview Introduction On July 18, 2013, IAIS announced that it had developed a framework of policy measures for; however, the proposed HLA measures will be subject to further consultation before they are finalized in 2015 in advance of the proposed implementation date of 2019. Components Enhanced. Supervision • • Enhanced Recoveryand and. Resolution • • Recovery Higher. Loss. Absorbency • • Higher Institute of International Finance Implementation Timeline Time July 2013 Action Designation of the first G-SII cohort July 2014 Crisis Management Groups (CMG) to be established for the first G-SII cohort July 2014 Systemic Risk Management Plan (SRMP) to be completed End 2015 IAIS to develop implementation details for HLA that will apply to designated G-SIIs starting from 2019 November 2017 The FSB to designate the cohort of G-SIIs, based on the IAIS methodology and 2016 data, for which the HLA policy measure will apply, with implementation beginning in 2019 January 2019 G-SIIs designated in November 2017 to apply the HLA requirements

Basic Capital Requirements(BCR) and Higher Loss Absorbency(HLA) BCR HLA As a foundation for HLA requirements for GSIIs, the IAIS will develop straightforward, basic capital requirements to apply to all group activities, including non-insurance subsidiaries. The BCR is intended to balance between simplicity and risk sensitivity, as well as provide a more comparable foundation for the HLA than local capital requirements. Based on the foundation of the BCR, the higher loss absorbency requirements will focus on systemic risks and non-traditional non-insurance (NTNI) activities as the second step towards the ICS. The HLA will be completed in 2015 and implemented to G-SIIs from 2019. BCR 2014 Development Timeline BCR Field Testing Starts Test Ends Jan Feb Mar Apr First BCR Consultation Ends May Expert Inputs Concludes. IAIS approves Second BCR Proposal Consultation Starts Jun Jul Aug Sep Analysis on Field Test Results Concludes. Oct Nov FSB Reviews BCR Proposal Second BCR Consultation Ends Institute of International Finance G 20 Endorses BCR Proposal Dec

Common Framework for the Supervision of Internationally Active Insurance Groups (Com. Frame) Introduction Three Modules of Com. Frame is a set of international supervisory requirements focusing on the effective groupwide supervision of IAIGs. Com. Frame is built and expands upon the high level requirements and guidance currently set out in the IAIS ICPs, which generally apply on both a legal entity and group-wide level. Com. Frame consists of the following three modules: • Module one: The Scope of Com. Frame • Module two: The IAIG (including capital adequacy requirements) • Module three: The Supervisor (including establishment of supervisory colleges) Com. Frame Development Timeline Development 2010 to Dec 2013 Field Testing 2014 to end of 2018 Implementation starts in 2019 Institute of International Finance

Global Insurance Capital Standards(ICS) Introduction Development Steps of the ICS On October 9, 2013, the IAIS announced that it is committed to develop a risk based ICS by the end of 2016, followed by a twoyear period of testing and refinement with supervisors and IAIGs. The ICS is scheduled to be implemented beginning in 2019. After completion, the ICS will be included in Com. Frame replacing the content of Module 2 Element 5 Capital Adequacy Assessment. The IAIS has committed to develop the ICS in the following three steps: • The first step is to develop ICS by end 2016. • The second step is to test and refine the framework by 2018. • The third step is to implement it globally starting in 2019. ICS Development Timeline Development Phase Testing and Refining In three steps by the end of 2016 To the third quarter of 2018 Institute of International Finance Implementation starts in 2019

International Insurance Regulatory Issues 10 th Annual Insurance Public Policy Summit “Confronting New Challenges in U. S. and International Regulation” Andrés Portilla Director, Regulatory Affairs Department aportilla@iif. com