G-SIIs: capital adequacy - Executive Summary

FSI Descriptive  | 
24 June 2017
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Background and policy objectives

In the insurance sector, the main policy reform in response to the Great Financial Crisis was the introduction of capital adequacy requirements for global systemically important insurers (G-SIIs) by the International Association of Insurance Supervisors (IAIS). The requirements are as follows:

Key components

BCR Required Capital

In general, the BCR Required Capital is calculated as follows:

BCR Required Capital = Required Capital for insurance business and non-insurance business

BCR Required Capital for insurance business = scaling factor (133%) x risk factor x exposure measure for each segment (see table below)

BCR Required Capital for non-insurance business =

  • Regulated banking business: max (capital required to meet the Basel III minimum leverage ratio of 3%, 8% of risk-weighted assets)
  • Non-regulated banking business: capital required to meet the Basel III minimum leverage ratio of 3%, scaled up by 133%
  • Securities business: 12% of three-year average gross income, scaled up by 133%
  • Other non-insurance business: the applicable global capital standard, scaled up by 133%

As a transitional measure, the scaling factor (133%) is introduced gradually, increasing from 111% in 2016 to 122% in 2017 and 133% in 2018.

HLA Required Capital

The HLA Required Capital essentially uplifts each component of the BCR Required Capital by specified HLA factors depending on the systemic relevance bucket of each G-SII, as measured by its G-SII score.

This Executive Summary and related tutorials are also available in FSI Connect, the online learning tool of the Bank for International Settlements.