Federal Insurance Office Study on the Insurance Capital Standard, 64228-64231 [2020-22384]

Download as PDF 64228 Federal Register / Vol. 85, No. 197 / Friday, October 9, 2020 / Notices 30. Nebraska Department of Health & Human Services 31. New Hampshire Department of Health & Human Services, Division of Economic & Housing Stability, Bureau of Family Assistance 32. New Jersey Department of Human Services 33. New Mexico Human Services Department 34. New York State Office of Temporary & Disability Assistance 35. North Carolina Department of Health & Human Services 36. North Dakota Department of Human Services 37. Ohio Department of Job and Family Services 38. Ohio Department of Medicaid 39. Oklahoma Department of Human Services, Adult & Family Services 40. Oregon Health Authority, Department of Human Resources 41. Pennsylvania Department of Human Services 42. Rhode Island Department of Human Services 43. South Carolina Department of Social Services 44. South Dakota Department of Social Services 45. Tennessee Department of Human Services 46. Texas Health and Human Services Commission 47. Utah Department of Workforce Services 48. Vermont Department of Children and Families, Economic Services Division 49. Virginia Department of Social Services 50. Washington Department of Social & Health Services 51. Wisconsin Department of Children & Families 52. Wyoming Department of Family Services Authority for Conducting the Matching Program: In accordance with section 6103(l)(7) of the Internal Revenue Code (IRC), the Secretary shall, upon written request, disclose current return information from returns with respect to unearned income from the IRS files to any federal, state, or local agency administering a program listed below: (i) A state program funded under part A of title IV of the Social Security Act; (ii) Medical assistance provided under a state plan approved under title XIX of the Social Security Act, or subsidies provided under section 1860D–14 of such Act; (iii) Supplemental security income benefits provided under title XVI of the Social Security Act, and federally VerDate Sep<11>2014 17:26 Oct 08, 2020 Jkt 253001 administered supplementary payments of the type described in section 1616(a) of such Act (including payments pursuant to an agreement entered into under section 212(a) of Pub. L. 93–66); (iv) Any benefits provided under a state plan approved under title I, X, XIV, or XVI of the Social Security Act (as those titles apply to Puerto Rico, Guam, and the Virgin Islands); (v) Unemployment compensation provided under a state law described in section 3304 of the IRC; (vi) Assistance provided under the Food and Nutrition Act of 2008; (vii) State-administered supplementary payments of the type described in section 1616(a) of the Social Security Act (including payments pursuant to an agreement entered into under section 212(a) of Pub. L. 93–66); (viii)(I) Any needs-based pension provided under chapter 15 of title 38, United States Code, or under any other law administered by the Secretary of Veterans Affairs; (viii)(II) parents’ dependency and indemnity compensation provided under section 1315 of title 38, United States Code; (viii)(III) Health-care services furnished under sections 1710(a)(2)(G), 1710(a)(3), and 1710(b) of such title. Purpose: The purpose of this program is to prevent or reduce fraud and abuse in certain federally assisted benefit programs while protecting the privacy interests of the subjects of the match. Information is disclosed by the IRS only for the purpose of, and to the extent necessary in, determining eligibility for, and/or the correct amount of, benefits for individuals applying for or receiving certain benefit payments. Categories of Individuals: Individuals applying for or receiving benefits under federal and state administered programs. Categories of Records: The source Agency will furnish the IRS with records in accordance with the current IRS Publication 3373, DIFSLA Handbook. The Agency may request return information on a monthly basis for new applicants. The Agency may request information with respect to all beneficiaries once per year. The requests from the Agency will include: The Social Security Number (SSN) and name control (first four characters of the surname) for each individual for whom unearned income information is requested. IRS will provide a response record for each individual identified by the Agency. The total number of records will be equal to or greater than the number of records submitted by the Agency. In some instances, an individual may have more than one PO 00000 Frm 00121 Fmt 4703 Sfmt 4703 record on file. When there is a match of individual SSN and name control, IRS will disclose the following to the Agency: Payee account number; payee name and mailing address; payee taxpayer identification number (TIN); payer name and address; payer TIN; and income type and amount. System(s) of Records: Public Law 98– 369, Deficit Reduction Act of 1984, requires the Agency administering certain federally assisted benefit programs to conduct income verification to ensure proper distribution of benefit payments. The records in this match are to be disclosed only for purposes of, and to the extent necessary in, determining eligibility for, or the correct amount of benefits under, these programs. IRS will extract return information with respect to unearned income from the Information Returns Master File (IRMF), Treas/IRS 22.061, as published at 80 FR 54081–082 (September 8, 2015), through the DIFSLA Computer Matching Program. Ryan Law, Deputy Assistant Secretary for Privacy, Transparency, and Records. [FR Doc. 2020–22389 Filed 10–8–20; 8:45 am] BILLING CODE 4830–01–P DEPARTMENT OF THE TREASURY Federal Insurance Office Study on the Insurance Capital Standard Departmental Offices, Department of the Treasury. ACTION: Request for information. AGENCY: The Federal Insurance Office (FIO) of the U.S. Department of the Treasury (Treasury) is issuing this notice (Notice) to solicit input on a future study by FIO (FIO Study) to evaluate the potential effects of the insurance capital standard (ICS) on U.S. insurance markets, U.S. consumers, and U.S. insurers. FIO coordinates federal efforts and develops federal policy on prudential aspects of international insurance matters, including representing the United States at the International Association of Insurance Supervisors (IAIS). Version 2.0 of the ICS was adopted by the IAIS in November 2019, with a five-year monitoring period starting in 2020 for confidential reporting and discussion in supervisory colleges.1 FIO will consider the responses to this Notice to inform its work on the ICS and related matters, SUMMARY: 1 For additional information on Treasury’s efforts in the development of the ICS, refer to FIO’s Annual Reports, https://home.treasury.gov/policy-issues/ financial-markets-financial-institutions-and-fiscalservice/federal-insurance-office/reports-notices. E:\FR\FM\09OCN1.SGM 09OCN1 Federal Register / Vol. 85, No. 197 / Friday, October 9, 2020 / Notices including future revisions to the ICS and the economic impact assessment of the ICS to be conducted by the IAIS in 2023.2 DATES: Submit written comments on or before January 15, 2021. ADDRESSES: Submit comments electronically through the Federal eRulemaking Portal at https:// www.regulations.gov, in accordance with the instructions on that site, or by mail to the Federal Insurance Office, Attn: Krishna Kundu, Room 1410 MT, Department of the Treasury, 1500 Pennsylvania Avenue NW, Washington, DC 20220. Because postal mail may be subject to processing delays, it is recommended that comments be submitted electronically. If submitting comments by mail, please submit an original version with two copies. Comments should be captioned ‘‘FIO ICS Study.’’ In general, Treasury will post all comments to www.regulations.gov without change, including any business or personal information provided such as names, addresses, email addresses, or telephone numbers. All comments, including attachments and other supporting materials, are part of the public record and subject to public disclosure. You should submit only information that you wish to make available publicly. FOR FURTHER INFORMATION CONTACT: From the Federal Insurance Office: Steven Seitz, Director, 202–622–5042, Steven.Seitz@Treasury.gov; Krishna Kundu, Senior Insurance Regulatory Policy Analyst, 202–417–5221, Krishna.Kundu@Treasury.gov; or Andrew Shaw, Senior Policy Advisor, (202) 304–4532, Andrew.Shaw2@ Treasury.gov. Persons who have difficulty hearing or speaking may access these numbers via TTY by calling the toll-free Federal Relay Service at (800) 877–8339. SUPPLEMENTARY INFORMATION: I. Background FIO’s Engagement at the IAIS FIO was established by the DoddFrank Wall Street Reform and Consumer Protection Act of 2010, which authorizes FIO to coordinate federal efforts and develop federal policy on prudential aspects of international insurance matters, including representing the United States at the IAIS.3 As part of FIO’s commitment to transparency in its work at the IAIS, FIO 2 IAIS, 14 November 2019: Work Plan and Timeline 2020–24, https://www.iaisweb.org/page/ news/press-releases//file/87171/work-plan-andtimeline-2020-24. 3 31 U.S.C. 313(c)(1)(E). VerDate Sep<11>2014 17:26 Oct 08, 2020 Jkt 253001 is issuing this Notice to provide the public with the opportunity to provide input to help inform FIO’s future work on the ICS and related matters at the IAIS. Throughout its work at the IAIS, FIO will continue to work collaboratively with the other members of Team USA—the Federal Reserve Board (Federal Reserve), the National Association of Insurance Commissioners (NAIC), and the U.S. states. Both Congress and FIO’s Federal Advisory Committee on Insurance (FACI) have highlighted the need for further analysis and study of the ICS by FIO during the ICS monitoring period from 2020 to 2024. The Economic Growth, Regulatory Relief, and Consumer Protection Act of 2018 requires that, before supporting or consenting to the adoption of any final international insurance capital standard, the Secretary of the Treasury, the Chairman of the Federal Reserve, and the Director of the Federal Insurance Office, in consultation with the National Association of Insurance Commissioners, complete a study and submit a report to Congress on the impact of any such standard on consumers and U.S. markets.4 Additionally, in December 2019, FACI provided recommendations on FIO’s future work on the ICS, including that FIO: (1) Help drive forward the work needed to ensure timely execution on the milestones laid out during the November 2019 IAIS meetings, and (2) continue its successful engagement model with stakeholders.5 FIO Study of the ICS This Notice seeks input on how FIO should evaluate the potential effects of the ICS on the insurance market in the United States, including consumers and insurers.6 The Notice also seeks input on how U.S. insurers operating overseas may be affected by the potential implementation of the ICS in other jurisdictions. Comments in response to this Notice will help inform FIO’s work on the ICS during the monitoring period and FIO’s views regarding the future structure and content of the ICS economic impact assessment that the IAIS intends to conduct in 2023. FIO aims to complete its study prior to the IAIS’ issuance of a public consultation 4 Economic Growth, Regulatory Relief, and Consumer Protection Act, § 211(c)(3)(A). 5 Federal Advisory Committee on Insurance, https://home.treasury.gov/system/files/311/ December2019FACI_InternationalProposedRecs_ 0.pdf. 6 International standards adopted by the IAIS are not binding or operational in the United States unless implemented through the relevant state or federal legislative or administrative processes, as appropriate. PO 00000 Frm 00122 Fmt 4703 Sfmt 4703 64229 on the ICS as a prescribed capital requirement (PCR) and completion of its economic impact assessment in 2023. The ICS Since 2013, the IAIS has been developing a global ICS in order to create a common language among supervisors for assessing the capital adequacy of insurance groups that have cross-border operations or internationally active insurance groups (IAIGs).7 The ultimate goal of the IAIS is the development of a single ICS that includes a common methodology through which one ICS achieves comparable (i.e., substantially the same) outcomes across jurisdictions. The ICS is based on a total balance sheet approach, defined by the IAIS as a concept that recognizes the interdependence of assets, liabilities, regulatory capital requirements, and capital resources. The total balance sheet approach is intended to ensure that the impacts of all relevant material risks on an IAIG’s overall financial position are appropriately and adequately recognized.8 During the monitoring period, the IAIS has asked group-wide supervisors to encourage annual confidential reporting of a reference ICS that consists of three components: (1) A marketadjusted valuation methodology (MAV) with a single discounting approach; (2) a standard method for calculating the capital requirement; and (3) converged criteria for qualifying capital resources. Additional reporting of the ICS based on an alternative valuation methodology, Generally Accepted Accounting Principles with Adjustments (GAAP Plus), and other methods to calculate the ICS capital requirement would be permitted at the option of the groupwide supervisor during the monitoring period. Optional reporting could also include the submission of results based on the Aggregation Method (AM), which will be under review for comparability 7 An IAIG is defined to be an insurer that meets the following two criteria: (1) Internationally Active (i.e., premiums are written in three or more international jurisdictions; and gross written premiums outside of the home jurisdiction are at least 10 percent of the group’s total gross written premiums), and (2) Size (based on a three-year rolling average), where total assets are at least USD 50 billion or gross written premiums are at least USD 10 billion. IAIS, Insurance Core Principles and Common Framework for the Supervision of Internationally Active Insurance Groups, Updated November 2019, https://www.iaisweb.org/page/ supervisory-material/insurance-core-principlesand-comframe//file/91154/iais-icps-and-comframeadopted-in-november-2019. 8 IAIS, Risk-Based Global Insurance Capital Standard Version 2.0 Public Consultation, July 31, 2018, https://www.iaisweb.org/page/supervisorymaterial/insurance-capital-standard//file/76133/ ics-version-20-public-consultation-document. E:\FR\FM\09OCN1.SGM 09OCN1 64230 Federal Register / Vol. 85, No. 197 / Friday, October 9, 2020 / Notices to the ICS during the monitoring period.9 Over the last few years, the United States has been leading the development of the AM, which leverages the NAIC’s group capital calculation (GCC) work and the Federal Reserve’s Building Block Approach (BBA). Building on existing state-based insurance standards, the GCC and BBA are each entity-based approaches that take the capital resources and capital requirements for each entity within an insurance group and aggregate them into a group capital calculation. By using the GCC and BBA as the bases for its development, the AM is currently structured to be more reflective of the insurance regulatory framework and business practices in the United States. In November 2019, the IAIS adopted version 2.0 of the ICS, which eliminated the options that were analyzed under version 1.0. The IAIS has agreed to implement the ICS in two phases—a five-year monitoring period from 2020 through 2024 during which the ICS will continue to be refined, followed by a second phase when the ICS will be implemented as a PCR in 2025.10 Further, the IAIS stated in November 2019 that it aims to be in a position by the end of the monitoring period to assess whether the AM provides comparable—i.e., substantially the same (in the sense of the ultimate goal)— outcomes to the ICS. If so, the AM will be considered an outcome-equivalent approach for implementation of the ICS as a PCR.11 Additionally, during the latter half of 2023, the IAIS plans to issue a public consultation on the ICS and initiate an economic impact assessment, with the aim of addressing the results of those undertakings in the final version of the ICS to be implemented as a PCR.12 II. Request for Comments FIO is interested in responses to the following questions. Commenters may also provide information on other issues or topics that are relevant to FIO’s work on the ICS, the FIO Study, and related IAIS matters. 1. If the ICS were adopted in the United States, how would this affect the insurance market in the United States, 9 Id. 10 IAIS, Explanatory Note on the Insurance Capital Standard (ICS) and Comparability Assessment, November 14, 2019, https:// www.iaisweb.org/page/news/press-releases//file/ 87173/explanatory-note-on-the-ics-andcomparability-assessment. 11 Id. 12 IAIS, 14 November 2019: Work Plan and Timeline 2020–24, https://www.iaisweb.org/page/ news/press-releases//file/87171/work-plan-andtimeline-2020-24. VerDate Sep<11>2014 17:26 Oct 08, 2020 Jkt 253001 including consumers and insurers? How would the adoption of the ICS affect the competitiveness of U.S.-domiciled IAIGs, foreign insurance groups with significant operations in the United States, and U.S. insurers that have current or planned operations abroad? 2. Please provide information on whether the ICS could create regulatory capital arbitrage opportunities or have procyclical effects, leading to increased volatility in U.S. insurance markets. 3. How should the FIO Study consider the potential effects of implementing the AM in U.S. insurance markets as compared to implementing the ICS? In addition, should the FIO Study consider the potential impact upon U.S. insurance markets if credit rating agencies were to accept the ICS as a global standard? 4. What information should be considered in evaluating the impact of ICS implementation on the various business lines and the cost and availability of different product types in the U.S. insurance market? 5. If the ICS were implemented in foreign jurisdictions where U.S. insurers operate, what effects could the ICS have on the ability of U.S. insurers to compete with local insurers and other international insurers in these overseas markets? How should FIO evaluate issues related to global competitiveness of U.S. insurers and potential adoption of the ICS by foreign jurisdictions? 6. Please provide your views on the following issues, as relevant to the FIO Study. a. Data for FIO Study: The ICS has been developed with data provided by volunteer insurance groups. To what extent should FIO use data provided to FIO by individual insurers to conduct the FIO Study? In addition to data from specific insurers, are there any other relevant data sources that should be used to evaluate the ICS? If so, what other sources of quantitative and qualitative data would be available, including any data that could be representative of U.S. insurance practices and product types. b. Market Effects from MAV: The reference ICS is based on a marketadjusted valuation methodology. What information should be considered in assessing MAV versus other valuation approaches and their potential effects on the insurance market in the United States, including consumers and insurers? In particular, how should the FIO Study consider how MAV affects the following areas? i. Changes to U.S. insurer investment behavior and ability to match assetliability cash flows; PO 00000 Frm 00123 Fmt 4703 Sfmt 4703 ii. Implications for product offerings and shifts in product mix for both life insurers and property & casualty insurers; and iii. Potential effects on insurers’ role as a significant source of long-term investment and liquidity in the economy. c. Capital Requirement: The ICS capital requirement is based on a standardized framework, whereby the calculation of ICS required capital, including the risks and stresses, is defined. How should the FIO Study consider the following? i. The extent to which jurisdictionspecific risks should be taken into account; and ii. The use of internal ratings for assessing credit risk exposures. d. Available Capital: The reference ICS measures available capital according to IAIS-established criteria and composition limits. The IAIS is also considering transitional arrangements during the monitoring period in order to ensure a smooth transition of the ICS as a PCR. How should the FIO Study consider the following? i. Application of transitional arrangements during the monitoring period; and ii. Implications for the fungibility of capital 13 under the ICS. e. Jurisdictional Flexibility: The reference ICS recognizes a limited number of areas for national discretion, such as senior debt as qualifying capital. Should the FIO Study evaluate any further application of jurisdictional flexibility for ICS implementation? 7. Please provide any views regarding the following additional issues, as they relate to the FIO Study. a. What data and input from market participants should be taken into consideration? b. Describe any data or data services that independent third parties could provide for purposes of the FIO Study. c. For the purposes of the FIO Study, would a ‘‘point in time’’ analysis be appropriate or would another time frame be more relevant for determining the implications? 14 13 Fungibility of capital refers to the availability of capital resources in the balance sheet of a single company in a group to fully absorb any amount of losses within that group (i.e., the ability to absorb losses arising anywhere within the IAIG). 14 Point in time analysis refers to taking a snapshot of the ICS at a particular point in time during the monitoring period and conducting a study based on the ICS framework at that time. The IAIS has stated that it expects the monitoring period to be a period of stability. As noted above, FIO aims to complete the impact study for input to the IAIS before issuance of the public consultation of the ICS as a PCR and the economic impact assessment in 2023. E:\FR\FM\09OCN1.SGM 09OCN1 Federal Register / Vol. 85, No. 197 / Friday, October 9, 2020 / Notices 8. How should the FIO Study inform FIO’s engagement on the IAIS economic impact assessment of the ICS? 9. How has the COVD–19 pandemic informed your views on the issues discussed in this Notice? 10. Please provide any other comments on the issues discussed in this Notice. Steven E. Seitz, Director, Federal Insurance Office. [FR Doc. 2020–22384 Filed 10–8–20; 8:45 am] BILLING CODE 4810–25–P DEPARTMENT OF VETERANS AFFAIRS [OMB Control No. 2900–0059] Agency Information Collection Activity: Statement of Person Claiming To Have Stood In Relation of Parent Veterans Benefits Administration, Department of Veterans Affairs. ACTION: Notice. AGENCY: Veteran’s Benefits Administration (VBA), Department of Veterans Affairs (VA), is announcing an opportunity for public comment on the proposed collection of certain information by the agency. Under the Paperwork Reduction Act (PRA) of 1995, Federal agencies are required to publish notice in the Federal Register concerning each proposed collection of information, including each proposed reinstatement of a currently approved collection, and allow 60 days for public comment in response to the notice. DATES: Written comments and recommendations on the proposed collection of information should be received on or before December 8, 2020. ADDRESSES: Submit written comments on the collection of information through Federal Docket Management System (FDMS) at www.Regulations.gov or to SUMMARY: VerDate Sep<11>2014 17:26 Oct 08, 2020 Jkt 253001 Nancy Kessinger, Veterans Benefits Administration, Department of Veterans Affairs, 810 Vermont Avenue NW, Washington, DC 20420 or email to nancy.kessinger@va.gov. Please refer to ‘‘OMB Control No. 2900–0059’’ in any correspondence. During the comment period, comments may be viewed online through FDMS. FOR FURTHER INFORMATION CONTACT: Danny S. Green at (202) 421–1354. SUPPLEMENTARY INFORMATION: Under the PRA of 1995, Federal agencies must obtain approval from the Office of Management and Budget (OMB) for each collection of information they conduct or sponsor. This request for comment is being made pursuant to Section 3506(c)(2)(A) of the PRA. With respect to the following collection of information, VBA invites comments on: (1) Whether the proposed collection of information is necessary for the proper performance of VBA’s functions, including whether the information will have practical utility; (2) the accuracy of VBA’s estimate of the burden of the proposed collection of information; (3) ways to enhance the quality, utility, and clarity of the information to be collected; and (4) ways to minimize the burden of the collection of information on respondents, including through the use of automated collection techniques or the use of other forms of information technology. Authority: 38 U.S.C. 1310, 1315. Title: Statement of Person Claiming to Have Stood in Relation of Parent (VA Form 21P–524). OMB Control Number: 2900–0059. Type of Review: Reinstatement of a previously approved collection. Abstract: The Department of Veterans Affairs (VA), through its Veterans Benefits Administration (VBA), administers an integrated program of benefits and services, established by law, for veterans, service personnel, and their dependents and/or beneficiaries. PO 00000 Frm 00124 Fmt 4703 Sfmt 9990 64231 Title 38 U.S.C. 5101(a) provides that a specific claim in the form provided by the Secretary must be filed in order for benefits to be paid to any individual under the laws administered by the Secretary. 38 U.S.C 1315 established Dependency Indemnity Compensation to Parents (known as Parents’ DIC). Parent’s DIC is a monthly benefit payable to the parent(s) of a deceased Veteran. The payable monthly benefit is dependent on the parent’s (parents’) annual income. Additional funds are payable to the parent(s) if they are in a patient in a nursing home, blind, so nearly blind or significantly disabled as to need or require the regular aid and attendance of another person. 38 CFR 3.59 defines the term parent as ‘‘. . . a natural mother or father (including the mother of an illegitimate child or the father of an illegitimate child if the usual family relationship existed), mother or father through adoption, or a person who for a period of not less than 1 year stood in the relationship of a parent to a Veteran at any time before his or her entry into active service.’’ The information collected will be used by VBA to evaluate a claimant’s parental relationship to a deceased Veteran when the claimant is not the Veteran’s natural mother or father or adopted mother or father. Affected Public: Individuals and households. Estimated Annual Burden: 800 hours. Estimated Average Burden per Respondent: 2 hours (120 Minutes). Frequency of Response: Once. Estimated Number of Respondents: 400. By direction of the Secretary. Danny S. Green, Department Clearance Officer, Office of Quality, Performance, and Risk (OQPR), Department of Veterans Affairs. [FR Doc. 2020–22380 Filed 10–8–20; 8:45 am] BILLING CODE 8320–01–P E:\FR\FM\09OCN1.SGM 09OCN1

Agencies

[Federal Register Volume 85, Number 197 (Friday, October 9, 2020)]
[Notices]
[Pages 64228-64231]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-22384]


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DEPARTMENT OF THE TREASURY


Federal Insurance Office Study on the Insurance Capital Standard

AGENCY: Departmental Offices, Department of the Treasury.

ACTION: Request for information.

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SUMMARY: The Federal Insurance Office (FIO) of the U.S. Department of 
the Treasury (Treasury) is issuing this notice (Notice) to solicit 
input on a future study by FIO (FIO Study) to evaluate the potential 
effects of the insurance capital standard (ICS) on U.S. insurance 
markets, U.S. consumers, and U.S. insurers. FIO coordinates federal 
efforts and develops federal policy on prudential aspects of 
international insurance matters, including representing the United 
States at the International Association of Insurance Supervisors 
(IAIS). Version 2.0 of the ICS was adopted by the IAIS in November 
2019, with a five-year monitoring period starting in 2020 for 
confidential reporting and discussion in supervisory colleges.\1\ FIO 
will consider the responses to this Notice to inform its work on the 
ICS and related matters,

[[Page 64229]]

including future revisions to the ICS and the economic impact 
assessment of the ICS to be conducted by the IAIS in 2023.\2\
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    \1\ For additional information on Treasury's efforts in the 
development of the ICS, refer to FIO's Annual Reports, https://home.treasury.gov/policy-issues/financial-markets-financial-institutions-and-fiscal-service/federal-insurance-office/reports-notices.
    \2\ IAIS, 14 November 2019: Work Plan and Timeline 2020-24, 
https://www.iaisweb.org/page/news/press-releases//file/87171/work-plan-and-timeline-2020-24.

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DATES: Submit written comments on or before January 15, 2021.

ADDRESSES: Submit comments electronically through the Federal 
eRulemaking Portal at https://www.regulations.gov, in accordance with 
the instructions on that site, or by mail to the Federal Insurance 
Office, Attn: Krishna Kundu, Room 1410 MT, Department of the Treasury, 
1500 Pennsylvania Avenue NW, Washington, DC 20220. Because postal mail 
may be subject to processing delays, it is recommended that comments be 
submitted electronically. If submitting comments by mail, please submit 
an original version with two copies. Comments should be captioned ``FIO 
ICS Study.'' In general, Treasury will post all comments to 
www.regulations.gov without change, including any business or personal 
information provided such as names, addresses, email addresses, or 
telephone numbers. All comments, including attachments and other 
supporting materials, are part of the public record and subject to 
public disclosure. You should submit only information that you wish to 
make available publicly.

FOR FURTHER INFORMATION CONTACT: From the Federal Insurance Office: 
Steven Seitz, Director, 202-622-5042, [email protected]; 
Krishna Kundu, Senior Insurance Regulatory Policy Analyst, 202-417-
5221, [email protected]; or Andrew Shaw, Senior Policy 
Advisor, (202) 304-4532, [email protected]. Persons who have 
difficulty hearing or speaking may access these numbers via TTY by 
calling the toll-free Federal Relay Service at (800) 877-8339.

SUPPLEMENTARY INFORMATION:

I. Background

FIO's Engagement at the IAIS

    FIO was established by the Dodd-Frank Wall Street Reform and 
Consumer Protection Act of 2010, which authorizes FIO to coordinate 
federal efforts and develop federal policy on prudential aspects of 
international insurance matters, including representing the United 
States at the IAIS.\3\ As part of FIO's commitment to transparency in 
its work at the IAIS, FIO is issuing this Notice to provide the public 
with the opportunity to provide input to help inform FIO's future work 
on the ICS and related matters at the IAIS. Throughout its work at the 
IAIS, FIO will continue to work collaboratively with the other members 
of Team USA--the Federal Reserve Board (Federal Reserve), the National 
Association of Insurance Commissioners (NAIC), and the U.S. states.
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    \3\ 31 U.S.C. 313(c)(1)(E).
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    Both Congress and FIO's Federal Advisory Committee on Insurance 
(FACI) have highlighted the need for further analysis and study of the 
ICS by FIO during the ICS monitoring period from 2020 to 2024. The 
Economic Growth, Regulatory Relief, and Consumer Protection Act of 2018 
requires that, before supporting or consenting to the adoption of any 
final international insurance capital standard, the Secretary of the 
Treasury, the Chairman of the Federal Reserve, and the Director of the 
Federal Insurance Office, in consultation with the National Association 
of Insurance Commissioners, complete a study and submit a report to 
Congress on the impact of any such standard on consumers and U.S. 
markets.\4\ Additionally, in December 2019, FACI provided 
recommendations on FIO's future work on the ICS, including that FIO: 
(1) Help drive forward the work needed to ensure timely execution on 
the milestones laid out during the November 2019 IAIS meetings, and (2) 
continue its successful engagement model with stakeholders.\5\
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    \4\ Economic Growth, Regulatory Relief, and Consumer Protection 
Act, Sec.  211(c)(3)(A).
    \5\ Federal Advisory Committee on Insurance, https://home.treasury.gov/system/files/311/December2019FACI_InternationalProposedRecs_0.pdf.
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FIO Study of the ICS

    This Notice seeks input on how FIO should evaluate the potential 
effects of the ICS on the insurance market in the United States, 
including consumers and insurers.\6\ The Notice also seeks input on how 
U.S. insurers operating overseas may be affected by the potential 
implementation of the ICS in other jurisdictions. Comments in response 
to this Notice will help inform FIO's work on the ICS during the 
monitoring period and FIO's views regarding the future structure and 
content of the ICS economic impact assessment that the IAIS intends to 
conduct in 2023. FIO aims to complete its study prior to the IAIS' 
issuance of a public consultation on the ICS as a prescribed capital 
requirement (PCR) and completion of its economic impact assessment in 
2023.
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    \6\ International standards adopted by the IAIS are not binding 
or operational in the United States unless implemented through the 
relevant state or federal legislative or administrative processes, 
as appropriate.
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The ICS

    Since 2013, the IAIS has been developing a global ICS in order to 
create a common language among supervisors for assessing the capital 
adequacy of insurance groups that have cross-border operations or 
internationally active insurance groups (IAIGs).\7\ The ultimate goal 
of the IAIS is the development of a single ICS that includes a common 
methodology through which one ICS achieves comparable (i.e., 
substantially the same) outcomes across jurisdictions. The ICS is based 
on a total balance sheet approach, defined by the IAIS as a concept 
that recognizes the interdependence of assets, liabilities, regulatory 
capital requirements, and capital resources. The total balance sheet 
approach is intended to ensure that the impacts of all relevant 
material risks on an IAIG's overall financial position are 
appropriately and adequately recognized.\8\
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    \7\ An IAIG is defined to be an insurer that meets the following 
two criteria: (1) Internationally Active (i.e., premiums are written 
in three or more international jurisdictions; and gross written 
premiums outside of the home jurisdiction are at least 10 percent of 
the group's total gross written premiums), and (2) Size (based on a 
three-year rolling average), where total assets are at least USD 50 
billion or gross written premiums are at least USD 10 billion. IAIS, 
Insurance Core Principles and Common Framework for the Supervision 
of Internationally Active Insurance Groups, Updated November 2019, 
https://www.iaisweb.org/page/supervisory-material/insurance-core-principles-and-comframe//file/91154/iais-icps-and-comframe-adopted-in-november-2019.
    \8\ IAIS, Risk-Based Global Insurance Capital Standard Version 
2.0 Public Consultation, July 31, 2018, https://www.iaisweb.org/page/supervisory-material/insurance-capital-standard//file/76133/ics-version-20-public-consultation-document.
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    During the monitoring period, the IAIS has asked group-wide 
supervisors to encourage annual confidential reporting of a reference 
ICS that consists of three components: (1) A market-adjusted valuation 
methodology (MAV) with a single discounting approach; (2) a standard 
method for calculating the capital requirement; and (3) converged 
criteria for qualifying capital resources. Additional reporting of the 
ICS based on an alternative valuation methodology, Generally Accepted 
Accounting Principles with Adjustments (GAAP Plus), and other methods 
to calculate the ICS capital requirement would be permitted at the 
option of the group-wide supervisor during the monitoring period. 
Optional reporting could also include the submission of results based 
on the Aggregation Method (AM), which will be under review for 
comparability

[[Page 64230]]

to the ICS during the monitoring period.\9\
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    \9\ Id.
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    Over the last few years, the United States has been leading the 
development of the AM, which leverages the NAIC's group capital 
calculation (GCC) work and the Federal Reserve's Building Block 
Approach (BBA). Building on existing state-based insurance standards, 
the GCC and BBA are each entity-based approaches that take the capital 
resources and capital requirements for each entity within an insurance 
group and aggregate them into a group capital calculation. By using the 
GCC and BBA as the bases for its development, the AM is currently 
structured to be more reflective of the insurance regulatory framework 
and business practices in the United States.
    In November 2019, the IAIS adopted version 2.0 of the ICS, which 
eliminated the options that were analyzed under version 1.0. The IAIS 
has agreed to implement the ICS in two phases--a five-year monitoring 
period from 2020 through 2024 during which the ICS will continue to be 
refined, followed by a second phase when the ICS will be implemented as 
a PCR in 2025.\10\ Further, the IAIS stated in November 2019 that it 
aims to be in a position by the end of the monitoring period to assess 
whether the AM provides comparable--i.e., substantially the same (in 
the sense of the ultimate goal)--outcomes to the ICS. If so, the AM 
will be considered an outcome-equivalent approach for implementation of 
the ICS as a PCR.\11\ Additionally, during the latter half of 2023, the 
IAIS plans to issue a public consultation on the ICS and initiate an 
economic impact assessment, with the aim of addressing the results of 
those undertakings in the final version of the ICS to be implemented as 
a PCR.\12\
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    \10\ IAIS, Explanatory Note on the Insurance Capital Standard 
(ICS) and Comparability Assessment, November 14, 2019, https://www.iaisweb.org/page/news/press-releases//file/87173/explanatory-note-on-the-ics-and-comparability-assessment.
    \11\ Id.
    \12\ IAIS, 14 November 2019: Work Plan and Timeline 2020-24, 
https://www.iaisweb.org/page/news/press-releases//file/87171/work-plan-and-timeline-2020-24.
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II. Request for Comments

    FIO is interested in responses to the following questions. 
Commenters may also provide information on other issues or topics that 
are relevant to FIO's work on the ICS, the FIO Study, and related IAIS 
matters.
    1. If the ICS were adopted in the United States, how would this 
affect the insurance market in the United States, including consumers 
and insurers? How would the adoption of the ICS affect the 
competitiveness of U.S.-domiciled IAIGs, foreign insurance groups with 
significant operations in the United States, and U.S. insurers that 
have current or planned operations abroad?
    2. Please provide information on whether the ICS could create 
regulatory capital arbitrage opportunities or have procyclical effects, 
leading to increased volatility in U.S. insurance markets.
    3. How should the FIO Study consider the potential effects of 
implementing the AM in U.S. insurance markets as compared to 
implementing the ICS? In addition, should the FIO Study consider the 
potential impact upon U.S. insurance markets if credit rating agencies 
were to accept the ICS as a global standard?
    4. What information should be considered in evaluating the impact 
of ICS implementation on the various business lines and the cost and 
availability of different product types in the U.S. insurance market?
    5. If the ICS were implemented in foreign jurisdictions where U.S. 
insurers operate, what effects could the ICS have on the ability of 
U.S. insurers to compete with local insurers and other international 
insurers in these overseas markets? How should FIO evaluate issues 
related to global competitiveness of U.S. insurers and potential 
adoption of the ICS by foreign jurisdictions?
    6. Please provide your views on the following issues, as relevant 
to the FIO Study.
    a. Data for FIO Study: The ICS has been developed with data 
provided by volunteer insurance groups. To what extent should FIO use 
data provided to FIO by individual insurers to conduct the FIO Study? 
In addition to data from specific insurers, are there any other 
relevant data sources that should be used to evaluate the ICS? If so, 
what other sources of quantitative and qualitative data would be 
available, including any data that could be representative of U.S. 
insurance practices and product types.
    b. Market Effects from MAV: The reference ICS is based on a market-
adjusted valuation methodology. What information should be considered 
in assessing MAV versus other valuation approaches and their potential 
effects on the insurance market in the United States, including 
consumers and insurers?
    In particular, how should the FIO Study consider how MAV affects 
the following areas?
    i. Changes to U.S. insurer investment behavior and ability to match 
asset-liability cash flows;
    ii. Implications for product offerings and shifts in product mix 
for both life insurers and property & casualty insurers; and
    iii. Potential effects on insurers' role as a significant source of 
long-term investment and liquidity in the economy.
    c. Capital Requirement: The ICS capital requirement is based on a 
standardized framework, whereby the calculation of ICS required 
capital, including the risks and stresses, is defined. How should the 
FIO Study consider the following?
    i. The extent to which jurisdiction-specific risks should be taken 
into account; and
    ii. The use of internal ratings for assessing credit risk 
exposures.
    d. Available Capital: The reference ICS measures available capital 
according to IAIS-established criteria and composition limits. The IAIS 
is also considering transitional arrangements during the monitoring 
period in order to ensure a smooth transition of the ICS as a PCR. How 
should the FIO Study consider the following?
    i. Application of transitional arrangements during the monitoring 
period; and
    ii. Implications for the fungibility of capital \13\ under the ICS.
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    \13\ Fungibility of capital refers to the availability of 
capital resources in the balance sheet of a single company in a 
group to fully absorb any amount of losses within that group (i.e., 
the ability to absorb losses arising anywhere within the IAIG).
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    e. Jurisdictional Flexibility: The reference ICS recognizes a 
limited number of areas for national discretion, such as senior debt as 
qualifying capital. Should the FIO Study evaluate any further 
application of jurisdictional flexibility for ICS implementation?
    7. Please provide any views regarding the following additional 
issues, as they relate to the FIO Study.
    a. What data and input from market participants should be taken 
into consideration?
    b. Describe any data or data services that independent third 
parties could provide for purposes of the FIO Study.
    c. For the purposes of the FIO Study, would a ``point in time'' 
analysis be appropriate or would another time frame be more relevant 
for determining the implications? \14\
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    \14\ Point in time analysis refers to taking a snapshot of the 
ICS at a particular point in time during the monitoring period and 
conducting a study based on the ICS framework at that time. The IAIS 
has stated that it expects the monitoring period to be a period of 
stability. As noted above, FIO aims to complete the impact study for 
input to the IAIS before issuance of the public consultation of the 
ICS as a PCR and the economic impact assessment in 2023.

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[[Page 64231]]

    8. How should the FIO Study inform FIO's engagement on the IAIS 
economic impact assessment of the ICS?
    9. How has the COVD-19 pandemic informed your views on the issues 
discussed in this Notice?
    10. Please provide any other comments on the issues discussed in 
this Notice.

Steven E. Seitz,
Director, Federal Insurance Office.
[FR Doc. 2020-22384 Filed 10-8-20; 8:45 am]
BILLING CODE 4810-25-P
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