AIG 2015 Annual Report Download - page 24

ITEM 1 / BUSINESS
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Foreign Regulation
Financial Stability Board (FSB): Consists of representatives of national financial authorities of the G20 nations. The FSB
itself is not a regulator, but is focused primarily on promoting international financial stability. It does so by coordinating the work
of national financial authorities and international standard-setting bodies as well as developing and promoting the
implementation of regulatory, supervisory and other financial policies.
International Association of Insurance Supervisors (IAIS): Represents insurance regulators and supervisors of more than
200 jurisdictions in nearly 140 countries and seeks to promote globally consistent insurance industry supervision. The IAIS
itself is not a regulator, but one of its activities is to develop insurance regulatory standards for use by local authorities across
the globe, such as the IAIS’ Insurance Core Principles (ICPs). The FSB has directed the IAIS to develop additional standards
in areas such as financial group supervision, capital and solvency standards, systemic financial risk and corporate governance
in order to reinforce international financial stability. The FSB also charged the IAIS with developing a framework for measuring
systemic risks posed by insurance groups. Based on the IAIS’ assessment methodology for identifying global systemically
important insurers (G-SIIs), the FSB has identified nine G-SIIs, including AIG, which may subject us to a policy framework for
G-SIIs that includes recovery and resolution planning, enhanced group-wide supervision, enhanced liquidity and systemic risk
management planning, and group-wide capital standards, including higher loss absorbency (HLA) capital. The IAIS is also
developing ComFrame, a Common Framework for the Supervision of Internationally Active Insurance Groups (IAIGs).
ComFrame sets out qualitative and quantitative standards in order to assist supervisors in collectively addressing an IAIG’s
activities and risks, identifying and avoiding regulatory gaps and coordinating supervisory activities. In connection with
ComFrame, the IAIS is in the process of developing a risk-based global insurance capital standard (ICS) applicable to IAIGs.
AIG currently meets the parameters set forth to define an IAIG. Standards issued by the FSB and/or IAIS are not binding on
the United States or other jurisdictions around the world unless and until the appropriate local governmental bodies or
regulators adopt appropriate laws and regulations.
European Union (EU): Financial companies that operate in the EU are subject to regulation by the national regulator of each
member state in which that firm operates. Groups that are categorized as financial conglomerates are also subject to
supplementary supervision. This seeks to enable supervisors to perform consolidated insurance group supervision at the level
of the ultimate parent entity. The objective of supplementary supervision is to detect, monitor, manage and control group risks
and ensure that capital is not accounted for twice or more within the conglomerate. The Prudential Regulatory Authority (PRA),
the United Kingdom’s prudential regulator, is AIG’s EU lead supervisor. The Financial Conduct Authority has oversight of AIG’s
European operations for consumer protection and competition matters within the UK. The EU has also established a set of
regulatory requirements under the European Market Infrastructure Regulation (EMIR) that include, among other things, risk
mitigation, risk management, regulatory reporting and clearing requirements.