Insurance Europe has published its response to a consultation by the International Association of Insurance Supervisors (IAIS) on its draft application paper on the supervision of control functions, which are a part of an insurer's corporate governance framework that help it to identify and manage risks.
Europe's insurers support a principle-based approach to the organisational structures of control functions with a clear allocation of responsibilities. A national supervisor's focus on an insurer's corporate governance structures should also be risk-based and proportionate to the characteristics of each company. The IAIS paper should therefore acknowledge this more clearly.
Supervisors should focus primarily on outcomes, rather than individual elements. Furthermore, the IAIS paper puts an overly strong and siloed emphasis on concepts such as independence, the precise positioning of control functions in organisational structures and a rigid application of models, such as the three lines model.
The IAIS paper should also explicitly refer to the contribution that risk management makes to achieving objectives and creating value, as well as to matters of "defence" and protecting value, rather than to defence alone. Moreover, the paper puts too strong an emphasis on how the design of a corporate governance framework can help insurers to avoid risks, while the focus should instead be on managing risks.