Global insurance regulators are ramping up scrutiny of insurers’ exposure to alternative assets, responding to structural shifts within the life insurance sector and emerging risks linked to climate change and artificial intelligence (AI), according to a new report from Fitch Ratings.
While climate change and AI present long-term challenges, Fitch highlights that regulatory efforts aimed at improving consistency in the life insurance sector may have more immediate effects. This is particularly evident in the growing private credit market, which has attracted increased attention from regulators.
Key regulatory bodies, such as the International Association of Insurance Supervisors (IAIS), the National Association of Insurance Commissioners (NAIC), and the Bermuda Monetary Authority, are focusing on insurers’ rising investments in alternative assets and cross-border asset-intensive reinsurance. Their objective is to identify potential liquidity and credit risks that may not be adequately addressed under current capital requirements. Additionally, regulators aim to prevent regulatory arbitrage and mitigate potential threats to financial stability.
One significant development is the IAIS’s adoption of the Insurance Capital Standard in late 2024, establishing a global solvency benchmark for internationally active insurance groups. The IAIS has also made climate risk a regulatory priority, emphasizing insurers’ resilience to climate-related shocks and their role in broader mitigation efforts.
In Europe, the European Insurance and Occupational Pensions Authority (EIOPA) is pushing for higher capital charges for natural catastrophe exposures under Solvency II, with several national regulators also increasing their focus on climate-related risks.
Simultaneously, the regulatory landscape surrounding AI is evolving. Authorities are developing guidelines to ensure the responsible deployment of AI within the industry. The IAIS is currently reviewing feedback on its draft paper, addressing concerns such as bias, data privacy, and accountability. EIOPA is also conducting a public consultation on AI governance and risk management practices.
As these regulatory measures take shape, insurers are facing mounting pressure to adapt to a rapidly changing landscape of risks and opportunities.
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