The Global Federation of Insurance Association (GFIA) has today published its response to a consultation conducted by the International Association of Insurance Supervisors (IAIS) on resolution powers and planning.

IAIS approach to resolution powers and planning must reflect the differences between the banking and insurance business models. This approach should be proportionate to the relatively very low risk posed by insurers to financial stability.

When considering resolution powers and planning, it should also be recognised that the nature of insurance failures allows portfolios to be transferred and run-off over a long period of time, in contrast with bank failures. Therefore, a very different set of tools and level of intervention is usually required.

For IAIS it is essential to take existing legislation into consideration. To that extent, in some jurisdictions in Europe, insurance guarantee schemes are last-resort mechanisms providing additional protection after all resources from the insurance undertaking have been exhausted and they should remain that way.

GFIA supports the application of the proportionality principle to provide needed flexibility and minimize burdens on both resolution authorities and insurers.