Speech: International insurance regulation in a fast-changing world

Good afternoon.

It is a pleasure to be here in Dublin, and I would like to thank Insurance Ireland for the invitation to join you today.

The placement of this session gives me a useful starting point.

The panel immediately before this keynote asked how we keep risk insurable, particularly in the face of growing natural catastrophe risks and protection gaps. The discussion immediately after will turn to how insurance capital can support European growth.

These may appear to be different questions. But they share an important foundation: a resilient, well-functioning insurance sector.

Insurance must continue to protect individuals, households and businesses against an increasingly complex landscape of risks. At the same time, as a major long-term investor, the sector has an important role in supporting investment and economic activity.

A resilient insurance sector must be able both to protect against risk and to put capital to work. Good regulation and supervision provide the foundation for both.

And neither side of this equation stops at Europe’s borders.

European insurers operate in global markets, invest across borders and rely on global reinsurance and capital markets to manage and diversify risk. At the same time, many of the risks they face – from natural catastrophes and geopolitical shocks to cyber threats, technological change and developments in financial markets – are increasingly interconnected and readily transmit across sectors and jurisdictions.

So achieving the best outcomes from European insurance cannot be considered in isolation from the wider global insurance and financial system.

And this reinforces a key consideration: effective insurance supervision requires coherence and cooperation across borders. This is an imperative that has underpinned the work of the IAIS since its establishment more than three decades ago.

From standards to outcomes
A central part of the IAIS’s work has been to build the global architecture for effective insurance supervision.

Today, that architecture is well developed.

Our Insurance Core Principles provide the globally accepted framework for insurance supervision generally. The Common Framework for the Supervision of Internationally Active Insurance Groups (ComFrame) provides additional requirements for the effective group-wide supervision of internationally active insurance groups. And the Holistic Framework for Systemic Risk (the Holistic Framework) provides a global approach to assessing and mitigating systemic risk in the insurance sector.

In December 2024, our members adopted the Insurance Capital Standard, the ICS. That was a landmark achievement, establishing for the first time a global, risk-based capital standard for internationally active insurance groups.

The ICS also demonstrated something important: even in a period of growing geopolitical fragmentation, sustained international cooperation remains both possible and very beneficial.

But the adoption of standards is not an end in itself. Their effectiveness depends on what follows:

That means implementation. It means keeping supervisory approaches responsive as risks, markets and business models evolve. And it means ensuring that regulation and supervision remain proportionate and focused on the outcomes and risks that matter.

And I deliberately mention outcomes here. For there is a more fundamental question behind all of this.

What are we ultimately trying to achieve?

For me, high-quality regulation and supervision must be rooted in a clear understanding of the outcomes we are seeking to achieve. They are an optimally functioning insurance system that delivers for the financial wellbeing of individuals and households and supports businesses and economies in achieving sustainable growth.

To achieve this, an insurance system must demonstrate certain qualities. These are qualities that that regulators and supervisors are focused on. I would highlight four.

A well-functioning insurance system should be trusted, resilient, understood and efficient.

Or, if you like acronyms: TRUE.

Let me explain what I mean.

First, trusted

Insurance depends fundamentally on trust. Policyholders make payments today in return for a promise to be fulfilled in the future – often many years into the future.

People therefore need to believe that insurance works in their interest, that they will be treated fairly, and that insurers will deliver in a timely way on the commitments they have made.

This is why conduct and policyholder protection are not peripheral to good supervision. They are integral to a well-functioning insurance market.

Second, resilient

Insurance needs to be reliably there when it is needed. As risks evolve, the insurance system needs to remain capable of providing meaningful protection to households and businesses. And that protection needs to be effective – so that the risks that need covering can be covered.

Third, understood

Insurance can be complex. For it to work effectively, people need to be able to understand and make use of it in practice – what protection they need, what they are buying, and what is and is not covered.

Clear information and communication are important here, as is financial literacy. And this is an area where supervisors cannot act alone. Governments, industry and international partners all have a role to play in helping people better understand risk and the protection insurance can provide.

And fourth, efficient

Regulation and supervision need to be proportionate and focused on doing only what is needed to deliver on outcomes and ensure that material risks are mitigated. As markets, business models and risks evolve, supervisory approaches need to evolve with them – while avoiding unnecessary complexity and burden.

This is also about making the best use of limited supervisory resources. Supervisors need to be able to direct their attention and resources towards the risks and activities that are most material.

Trusted. Resilient. Understood. Efficient.

These are not separate objectives. They reinforce one another and capture what I believe a modern, well-functioning insurance system should look like – one that people can trust and understand, that provides the protection they need, and that does so efficiently.

This focus on outcomes also provides a useful lens for the work of the IAIS. Whether we are setting standards, supporting implementation, strengthening supervisory practices, building capacity or facilitating cooperation between supervisors, the ultimate test is not simply whether we have produced another standard or piece of guidance.

The test is whether our work contributes to better outcomes in practice.

The international dimension
Delivering these outcomes also depends on effective international cooperation – an aspect that is at the core of the IAIS’s mandate. In practice, this international dimension of our work has three distinct but closely related elements: That is coordination, consistency and collaboration.

Though they sound the similar, each of those words has a different meaning and emphasis.

An example of coordination is the work we do across our membership and their jurisdictions to monitor, assess and consider an appropriate response to emerging and systemic risks in the insurance sector. I will say more about this below.

An example of cross-border consistency is the significant work we do on standard setting, including support for and assessment of the implementation of those standards.

Insurance is an international activity. Policyholders and economies benefit greatly from the ability of insurance companies to operate across borders-either directly or through reinsurance activities. This allows insurers to diversify risks across a wider international risk pool. As risk pooling and diversification are central to insurance, such cross-border activity brings real benefits. But this depends on there being confidence that the standards applied in different jurisdictions are of a similar level of quality. The IAIS’s international standard setting and implementation assessment activities are at the heart of ensuring that this is achieved.

Consistency importantly does not mean uniformity. Our global standards provide a common foundation, but their implementation needs to reflect different market structures, jurisdictional specificities, and to allow for appropriately differentiated approaches.

Thirdly, collaboration. This is key to a membership-based organisation such as the IAIS. We bring together supervisory authorities from over 200 jurisdictions, representing insurance markets with very different structures, legal frameworks and stages of development.

The IAIS helps convene regional engagements that bring our activities directly to our members. Each year we have 500 to 700 supervisors attend these meetings, nearly 80% of them from emerging markets and developing economies. And, through our capacity building activities we engage even more, with over 1000 supervisors globally participating in the activities we organise with our implementation partners.

These activities allow our members to come together, learn from each other, and work collaboratively to address common challenges and enhance their supervisory practices. They also allow the IAIS to understand how risks are developing in different markets, identify practical implementation challenges and ensure that different perspectives inform our global work.

This matters particularly in areas such as financial inclusion, protection gaps and conduct, where market circumstances and consumer needs can differ considerably across jurisdictions.

Collaboration also extends beyond the insurance supervisory community. Many of the issues I have discussed today require expertise and action from different institutions both within the insurance sector and within the broader financial sector. That is why the IAIS works closely with other international organisations and standard-setting bodies.

Our role is to bring the insurance supervisory perspective to those discussions, while drawing on the expertise of others. The aim is to complement, rather than duplicate, each other’s work and to support coherent responses where responsibilities are shared.

This matters particularly in the current geopolitical environment.

Outcomes in a changing risk landscape 
I will now turn to what this means as we look at some of the major changes facing the insurance sector today.

Geopolitical developments are unfolding rapidly. Macroeconomic uncertainty remains elevated. Artificial intelligence is advancing at a remarkable pace. Climate-related risks continue to intensify. And structural changes in the life insurance sector are creating new interconnections across the financial system.

What makes this environment particularly challenging is not simply the number of risks we face. It is the way in which they increasingly interact.

Interconnected shocks can amplify one another across markets, sectors and borders.

For supervisors, this means that risks increasingly need to be understood not in isolation, but as part of a broader and rapidly evolving system.

At the IAIS, a critical part of how we respond is the reinforcing cycle between risk monitoring, response assessment, implementation support and, where needed, policy development.

Our annual Global Monitoring Exercise is at the heart of this approach. It draws on data from around 60 of the largest international insurance groups and more than 50 insurance supervisors, covering more than 90% of global written premiums.

Each year we form an assessment of systemic risk in the global insurance system. This feeds into the broader work of the Financial Stability Board and forms the basis for our annual Global Insurance Market Report.

One of the topics currently being considered is that of structural shifts in the life insurance sector.

Structural shifts in the life insurance sector
We have been closely monitoring structural developments in the life insurance sector for several years, particularly the increased investment by insurers in alternative assets, including private credit, and the growth of asset-intensive reinsurance.

These developments reflect important changes in the way insurers invest and manage their liabilities. And they can bring benefits. Alternative assets can provide diversification, offer opportunities for improved asset-liability matching and support the provision of long-term financing to the wider economy.

But they can also change the risk profile of insurers and create new interconnections across the financial system.

Private and less liquid assets can bring greater valuation uncertainty, complexity and information gaps. Asset-intensive reinsurance can redistribute risks across entities and jurisdictions and make it more important for supervisors to understand the economic substance of transactions and the resulting concentration and counterparty exposures.

Our monitoring gives us an important global perspective on these developments. The analysis we published last year found that, at the global aggregate level, the systemic risk associated with these structural shifts remains limited. But the pace of growth in alternative asset investments and asset-intensive reinsurance, together with concentrated exposures among some insurers, warrants continued supervisory attention.

At the IAIS we will continue to closely monitor developments in this area.

Technology
Another major area of change is technology.

Digitalisation has already transformed many insurance markets, and advances in artificial intelligence are accelerating that transformation.

The opportunities are significant. AI can improve underwriting and pricing, make claims handling more efficient, strengthen fraud detection and enable insurers to engage with customers in new ways. In some markets, technology can also help extend insurance to customers who have traditionally been difficult or costly to reach.

But the supervisory questions are also becoming more complex.

As AI moves from relatively contained, back-office applications into underwriting, pricing, claims and other consumer-facing activities, issues around governance and accountability, model risk, explainability, fairness and data protection become increasingly important.

The challenge for supervisors is not to prescribe how the technology should develop. Nor is it to constrain insurers from taking advantage of innovation.

It is to ensure that the risks arising from its use are appropriately understood and managed, and that existing expectations around governance, risk management and fair treatment of customers continue to apply as the technology evolves.

This is the approach we have taken at the IAIS. Our Application Paper on the supervision of artificial intelligence, published last year, provides a risk-based and proportionate framework for supervisors, including on governance and accountability, transparency, fairness and redress. Earlier this year, we complemented this with a practical Question Bank to help supervisors engage with insurers on AI governance and risk management.

But AI is only one part of the technological change supervisors need to consider.

Insurers’ growing reliance on digital infrastructure and third-party service providers is also creating new dependencies and concentrations of risk. Disruption at a major provider can affect multiple firms, potentially across sectors and borders.

The broader challenge is to ensure that supervision can keep pace with technological change without unnecessarily constraining it. And of course, quantum computing – with all of the opportunities and challenges it brings – seems increasingly just around the corner.

That means enabling the benefits of innovation while ensuring that the fundamentals – sound governance, effective risk management, operational resilience and fair treatment of customers – remain firmly in place.

Protection gaps
A final topic I want to mention brings me back directly to the discussion before this keynote: protection gaps.

Closing protection gaps is critical for supporting the societal purpose of insurance and aligns closely with our focus on outcomes.

When households and businesses are uninsured or underinsured, the consequences of catastrophic events can extend well beyond those directly affected. Losses can spill over to businesses, banks and real estate markets, and ultimately to government finances.

This is particularly evident in relation to natural catastrophes, where climate change and rising exposures are increasing the scale of the challenge in many parts of the world.

At the IAIS, we have therefore emphasised natural catastrophe protection gaps on our global policy agenda. Our work has examined their potential implications for financial stability, and we have worked with partners, including the World Bank, to identify practical approaches that can help jurisdictions assess and address them.

One lesson from this work is clear: there is no single solution.

The nature of protection gaps differs considerably across jurisdictions, reflecting differences in exposure to hazards, insurance penetration, fiscal capacity, market structures and the availability of data.

And many of the factors determining whether a risk remains insurable sit outside the remit of insurance supervisors.

Addressing protection gaps therefore requires collaboration between governments, supervisors, insurers and other stakeholders – combining measures to reduce and manage underlying risks with efforts to expand the availability and take-up of insurance.

Supervisors nevertheless have an important role to play. Regulatory and supervisory frameworks can support sustainable market development and responsible innovation, while ensuring that policyholders remain appropriately protected and that new risks are properly managed. 

This week we launched a practical tool designed to help policymakers, supervisors and stakeholders in their efforts to address natural catastrophe protection gaps. Drawing on the experience of our global membership we have launched an open-access library of initiatives and case studies from around the globe. Initially focused on public-private partnerships and initiatives to assess protection gaps and covering the gamut of perils – flood, wind, wildfire, landslide to mention a few – this on-line library, which we will continue to develop and expand, is designed to be a source of practical inspiration and insight for those seeking ways to increase the insurability and levels of cover for these harms.

Conclusion
Let me conclude by returning to where I started.

The discussions surrounding this keynote ask two important questions: how do we keep risks insurable, and how can insurers fulfil their role as long-term investors supporting economic growth?

For both, a well-functioning insurance system is the foundation.

And that brings me back to the four outcomes I set out earlier: trusted, resilient, understood and efficient. Together, they provide a way of thinking about the conditions needed for insurance to fulfil its role for policyholders and for the wider economy.

The risks and markets we supervise will continue to change. But those underlying objectives remain. Our task is to ensure that regulation and supervision keep pace – remaining effective and proportionate, while providing the stability and confidence that insurers, policyholders and the wider economy need.

That will require sustained cross-border coordination, consistency and collaboration as I have described here.

If we get that right, insurance will be better placed to fulfil its essential role: protecting people and businesses, supporting resilience and contributing to sustainable economic growth.

Thank you