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Global Capital Standards Finalised For AIG, 8 Big Insurers

The world’s nine biggest insurance companies will have to hold more capital under new rules just finalised by global regulators that aim to prevent taxpayer bailouts of the industry in a crisis.

Regulators decided to look at the multi-trillion dollar insurance industry following the massive public rescue of insurer AIG in the United States during the 2007-2009 financial crisis.

At the request of the Group of 20 economies (G20), the International Association of Insurance Supervisors (IAIS) has completed a two-part capital requirement for the nine companies, whose collapse could wreak havoc in global markets.

They include AIG and MetLife from the United States, Britain’s Aviva, Ping An Insurance of China, Italy’s Generali, and Axa of France.

The insurers will not have to make public their extra capital buffer until 2019 but, as with new banking capital rules, investors are likely to want to know if a company is strong enough to comply early without having to raise fresh capital.

The IAIS said the first capital cushion, known as the basic capital requirement, will effectively be what each of the nine insurers are
already required to hold under national law.

A consultation had initially proposed that the basic capital requirement, to be phased in over three years from 2016, should be at least 75 percent of the national requirement.

The second capital buffer, known as higher loss absorbency, will be on average 10 percent of the basic requirement, depending on the riskiness of a company’s operations, the IAIS said in a statement.

This has been scaled back from an original proposal for a higher loss absorbency buffer that was on average 12-13 percent of the basic

All nine must meet their combined capital requirements from 2019 under the finalized rules which G20 leaders are due to formally endorse next month at a summit in Turkey.

The G20’s regulatory task force, the Financial Stability Board, is due next month to update its list of insurance companies deemed to be systemically important, but it is not expected to include any big re-insurers, an omission that has raised Foremost underwriting Firm, Sovereign Trust Insurance Plc has announced the elevation of two of its erstwhile General Managers to the position of Executive Directors respectively.

The duo who by their recent elevation will automatically become Board Members of the company are Mr. Olaotan Soyinka and Mrs. Ugochi
Odemelam. Soyinka before now was the General Manager/Divisional Head, Technical while Ugochi took charge of Marketing/Business Development for the organisation in the capacity of a General Manager/Divisional Head.

The two appointments were recently ratified by the Board of Directors and both have assumed their new roles since September 14, 2015.

Mr. Segun Bankole, the Chief Spokesperson of Sovereign Trust Insurance Plc, said the Board and Management of the company have so much
confidence in the two newly elevated Directors and it is expected that they will bring to bear their consummate wealth of experience in galvanizing the organisation to the next level of its growth stage.

Members of Management and Staff eyebrows of some regulators.

Some U.S. insurance supervisors have questioned the need for global capital rules at all.

Met Life has taken the U.S. government to court to challenge a U.S. regulatory panel’s decision to deem the firm “systemically” risky and therefore subject to tighter scrutiny.

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