I85PREP
⌘ K
III IC-29 study materials
III IC-29 study resources

III IC-29: Insurance Regulation and Supervision

III IC-29 · Work through your exam, one topic at a time.

All guide sections

Insurance Regulation and Supervision

Insurance Regulation and Supervision tests the supervisor's toolkit: licensing, prudential capital, market conduct, governance and policyholder protection. The domain asks how regulators permit entry, monitor solvency and intervene before failure harms policyholders.

Core rules

  • Licensing screens insurers, brokers, agents and intermediaries through fit-and-proper, capital and business-plan tests.
  • Prudential supervision focuses on solvency, reserves, assets, reinsurance and risk management; conduct supervision focuses on disclosure, fair treatment, complaints and mis-selling.
  • Solvency margin compares available capital with required capital. A breach triggers graduated intervention: restoration plan, business restrictions, asset controls, portfolio transfer or run-off.
  • Corporate governance requires board accountability, risk committees, internal controls and actuarial review.
  • Market exit should protect policyholders through transfer, run-off or guarantee schemes.
  • IAIS Insurance Core Principles provide a common supervisory benchmark: licensing, risk management, capital adequacy, conduct, fraud and cross-border cooperation.

Worked example

An insurer reports available solvency capital of 130 against a required control level of 100, but its business plan forecasts a further 20-point fall. The supervisor does not wait for insolvency: it requires a capital restoration plan, restricts dividend payments and new discretionary business, and may require a capital injection. Reasoning: supervision is forward-looking; the control level is an early trigger, not a licence to continue unchanged.

Traps

  • Confusing solvency (assets over liabilities) with liquidity (cash to pay today's claims).
  • Assuming licensing guarantees solvency.
  • Mixing prudential and conduct breaches; both can lead to enforcement but have different remedies.
  • Forgetting that policyholder protection can override shareholder returns in intervention.
  • Ignoring cross-border and group supervision when an insurer is part of a conglomerate.