A Core Curriculum for Insurance Supervisors ICP 16: Winding-up and Exit from the Market Teaching Note
Copyright 2006 International Association of Insurance Supervisors (IAIS). All rights reserved. The material in this module is copyrighted. It may be used for training by competent organizations with permission. Please contact the IAIS to seek permission. This teaching note was prepared by John Thompson, a private consultant based in Toronto, Canada, who provides advice and functional support to financial sector regulators, the financial services industry, and educational organizations. He is chairman of the Insurance Advisory Group for the Toronto International Leadership Centre (which is based in Toronto, Canada, and provides leadership development training for financial sector regulators). He is an actuary with more than 24 years of experience in senior positions within a life insurance company, both in Canada and the United Kingdom. Prior to becoming a consultant, he was deputy superintendent at the Office of the Superintendent of Financial Institutions in Canada. He has broad experience at the international level as the former chairman of the Executive Committee of the International Association of Insurance Supervisors (IAIS) and as a member of the Basel Committee for Banking Supervision.
ICP 16: Winding-up and Exit from the Market Teaching Note Context The following notes are written to help someone deliver a seminar on this module. The module may be adequately covered in a full-day seminar, but additional time would be useful in order to provide more time for group work and general discussion. Participants Participants are assumed to be insurance supervisors or others with a basic understanding of insurance and the role of a supervisory authority. Advance preparation Participants should be strongly encouraged to read the module in advance of the seminar, as it is impossible to cover the material thoroughly during the time available. The module includes a pretest, which participants should take before the seminar. Review the results, which should guide you on topics that may require extra attention during the presentation.
Insurance Supervision Core Curriculum Approach and resource materials The seminar should provide a combination of presentation, small-group interaction, feedback, and plenary discussion. Participants lose concentration without regular changes in mode of presentation and activity. Questions should be encouraged throughout. A PowerPoint presentation has been prepared and is available to guide the presentation. Questions and cases that may be used for the group work are included in the module, this teaching note, and the presentation. As the presenter, you may select the questions and cases that best fit the needs of your audience. The questions and cases should be available in writing for each participant, and the ones they are to consider should be clearly defined. The following presents more detail on the three activities constituting the smallgroup work. In the first two activities, each group should be asked to consider one question and report back to the assembled participants. The questions should reflect local conditions and be as relevant as possible to the participants in terms of the jurisdiction in which they work and their level of experience. Each presentation back to the group should be short and limited to no more than seven or eight minutes. Activity 1 You may select from exercises 4 7 and 11 13 in the module, develop questions that you feel apply to the audience, or consider the following: 1. Why is it important that supervisors apply consistent standards, compliance assessment tools, risk measurement, and performance expectations when assessing the financial condition of insurance companies? Explain your position, as it affects dealing with a company that could fail. 2. Why is it important for supervisors to apply reasonably similar sanctions for similar violations that are not covered in the examination process? Explain your position, as it affects dealing with companies that are not readily able to resolve their problems satisfactorily. 3. All insurers must maintain an adequate amount of capital. In your jurisdiction(s), at what point is a company deemed to have insufficient capital? At what point can the company be forced out of the market? Activity 2 You may select from exercises 17 19 and 22 24 in the module, develop questions that you feel apply to the audience, or consider the following:
ICP 16: Winding-up and Exit from the Market (Teaching Note) 1. Why is it important that supervisors around the world have reasonably consistent standards for controlling the way that insurance companies exit the local market? Explain your position. 2. Why would a supervisor be concerned if a company wants to leave the local market? What risks could be created by this decision? Explain your position. 3. If a company wants to leave the market voluntarily and has sufficient capital, what powers might you use to control market exit? Under what conditions might more significant powers be required? What are these powers? Explain why they might be required. Activity 3 In this activity, you should use cases that reflect the need for orderly processes to control market exit and illustrate the powers that are needed to complete that process. The cases can be built from the case that is used in the module (such as was done in exercises 31-32) or from real-life cases taken from your own experience. Participants must support their decisions with reasons, and the reasons may be more important than the solution proposed. The reasons given will illustrate the participant s level of understanding. Structure and timing of the seminar One suggestion for the overall structure and timing of the seminar is provided below. For the groups to be effective, active participation is required from every participant. Note that the number of participants will influence the time needed for group reporting sessions. A large number of participants may imply more groups to encourage participation, as each group should consist of no more than six to seven persons. However, if each group is to report back, then the larger number of groups will require more time for this reporting. Activity Details Number of minutes Introduction and overview Presentation on the need for structured supervisory process Encourage questions and comments related to the reading done before the seminar; post issues on a flipchart 15 Sections A to C of the module 30 Small-group work 30 Reporting and feedback Short presentations and discussion 60 Break Presentation on ICP 16 and the windingup process Sections D to F of the module 30
Insurance Supervision Core Curriculum Activity Details Number of minutes Small-group work 30 Reporting and feedback Short presentations and discussion 60 Lunch Presentation on putting the principles into practices Small-group work 30 Reporting and feedback Short presentations and discussion 60 Break Plenary activity Closing session Review and discuss examples of the winding-up process Participants and presenter offer final comments Presenter assigns post-seminar activities, if any Participants complete evaluation forms 30 60 20