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Practice paper

How should insurers’ foreign branches be supervised?

Shinya Kobayashi
Journal of Risk Management in Financial Institutions, 7 (3), 277-286 (2014)
https://doi.org/10.69554/RBVC3244

Abstract

In this era of globalisation, a number of insurers are operating on a worldwide basis. Globalisation brings new challenges to supervisors, as was observed during the financial crisis of 2007–2008, as well as a number of benefits. Insurers operate on a cross-border basis either by establishing subsidiaries or branches in other countries or offering insurance products without having physical offices outside their home country. Focusing on operations in the form of branches, this paper considers how foreign branches of insurers need to be regulated and supervised, and introduces a paper regarding the supervision of foreign branches, published by the International Association of Insurance Supervisors (IAIS) in October 2013. Foreign branches are regulated and supervised much like domestic insurers, including subsidiaries of foreign insurers. Nevertheless, some supervisors experience difficulties in supervising foreign branches. Branches are not a legal entity and therefore there is no board of directors at branch level. Additionally, a branch's assets backing insurance liabilities can be readily transferred to other countries. Considering such uniqueness of foreign branches, this paper also proposes some possible approaches to their supervision.

Keywords: regulation; supervision; insurance; foreign branches; policyholder protection; financial stability

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Author's Biography

Shinya Kobayashi is Associate Administrator of the International Association of Insurance Supervisors (IAIS). Prior to joining the IAIS in July 2013, he represented Japan as Deputy Director from the Financial Services Agency, Japan in several working parties of the IAIS, one of which was the Insurance Groups and Cross-Sectoral Issues Subcommittee, where he engaged in a number of standard-setting activities as Co-Vice Chair. He holds an MBA degree from the University of Edinburgh.

Citation

Kobayashi, Shinya (2014, June 1). How should insurers’ foreign branches be supervised?. In the Journal of Risk Management in Financial Institutions, Volume 7, Issue 3. https://doi.org/10.69554/RBVC3244.

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cover image, Journal of Risk Management in Financial Institutions
Journal of Risk Management in Financial Institutions
Volume 7 / Issue 3
© Henry Stewart
Publications LLP

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