Fitch Ratings has warned that new plans by the IAIS could make issues of certainty worse.
According to a statement from Fitch Ratings, the intentions of the International Association of Insurance Supervisors (IAIS) to come up with a global coverage capital standard based on risk will only bring about another layer of uncertainty for the insurance industry.
The goal of the IAIS is to have the standard created and fully in place by the year 2019.
This was pointed out by Fitch Ratings in the statement that they recently issued, in which they explained that the plan would apply to about fifty internationally active insurance groups (IAIGs). They warned that any growth in capital that the insurance industry would see would only be offset by unwanted financial results.
Fitch cautioned against the current intentions for a standard as it could be quite harmful to the insurance industry.
The statement said that “Any positive effects as a result of increased capital could be partly offset by negatives from the cost of higher capital and its impact on pricing and competitive position.” The belief is that the insurance industry would not benefit at all, in the long run, when all of the costs and impacts are taken into account.
It also went on to say that “We believe the impact will also depend on how consistently individual national regulators interpret and apply any eventual standard that emerges, as well as the degree of effective co-ordination between the various different national regulators responsible for any given IAIG.”
The report from Fitch stated that size will become a determining factor for companies in the insurance industries to be treated as IAIGs, particularly the insurers that have total assets that are greater than $50 billion, or that have over $10 billion in gross written premiums.
The rating agency also indicated that this could impact the way that the insurance industry is seen by global investors, stating that the standard may eventually be positive for insurers from the point of view of consistency and comparability. At the same time, though, it also explained that at a certain point, “there are already other important related initiatives under development and adds to existing uncertainties.”
