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Given the potential wide-reaching impacts on pricing, products, investment strategies and the cost of capital, A.M. Best doubts that the ambitious timeline can be met to develop and implement international capital standards by the International Association of Insurance Supervisors (IAIS).

A new Best’s briefing, titled, “A.M. Best Comments on the Development of International Capital Standards by the International Association of Insurance Supervisors,” notes that extensive changes have occurred within the IAIS structure in recent months, resulting in a less transparent process and few technical certainties as to how the international capital standards will evolve.

At the same time, it remains clear that the IAIS is committed to finalizing these standards for internationally active insurance groups by December 2016, with adoption by its members in the fourth quarter of 2018.

A.M. Best views the current timeline as ambitious due to the scope of developing and implementing a global capital standard from the current multifaceted and varying accounting, valuation and regulatory frameworks that exist across many jurisdictions.

A.M. Best said if agreement is not reached on key technical issues in the relative near term, it will leave limited opportunity for the type of extensive vetting and field testing of varying insurance company business lines through the changeable credit, underwriting and investment cycles that would be required for thoughtful regulation.

Companies must continue to follow these IAIS-related developments as they occur, and take advantage of the communication that the IAIS offers as the progression toward a global standard continues, A.M. Best continued.

The briefing also notes that while a global view of capital could be beneficial in the long term, the current level of resources and scarcity of common ground or alternative proposals could be a significant headwind to the current timeline.

A.M. Best does not foresee an impact on current ratings due to the potential implementation of these standards.

Source: A.M. Best Company

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