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🌐 '''Holistic framework for systemic risk''' is the [[Definition:International Association of Insurance Supervisors (IAIS) | IAIS]]'s comprehensive approach to identifying, monitoring, and mitigating [[Definition:Systemic risk | systemic risk]] in the global insurance sector, adopted as a successor to the earlier entity-based methodology that designated individual firms as [[Definition:Global systemically important insurer (G-SII) | global systemically important insurers (G-SIIs)]]. Rather than singling out specific companies for enhanced regulation, the holistic framework takes an activities-based and sector-wide perspective — recognizing that systemic risk can emerge from widespread market behaviors, concentrated exposures, or macroeconomic linkages, not only from the failure of a single large insurer. It represents a fundamental shift in how international supervisors conceptualize and respond to the insurance sector's potential to transmit or amplify financial instability.

⚙️ The framework operates through two reinforcing pillars: a supervisory toolkit for individual insurers and a global monitoring exercise conducted collectively by the IAIS membership. On the microprudential side, supervisors apply enhanced measures — including [[Definition:Liquidity risk | liquidity]] planning, [[Definition:Recovery and resolution planning | recovery and resolution planning]], [[Definition:Macroprudential supervision | macroprudential surveillance]], and [[Definition:Stress test | stress testing]] — to any insurer whose activities could generate systemic consequences, regardless of whether the firm carries a formal designation. The global monitoring exercise aggregates data from large internationally active insurance groups to track sector-wide trends in [[Definition:Interconnectedness | interconnectedness]], asset [[Definition:Liquidity | liquidity]], [[Definition:Counterparty risk | counterparty exposures]], and [[Definition:Non-traditional non-insurance activity (NTNI) | non-traditional activities]]. When warning indicators emerge, the IAIS can recommend targeted supervisory responses without waiting for a crisis to materialize.

🎯 By moving away from a rigid list of designated firms, the holistic framework addresses a long-standing criticism of the G-SII approach: that it created moral hazard for unlisted firms and stigmatized listed ones without necessarily capturing the most dangerous concentrations of risk. The framework acknowledges that a wave of correlated [[Definition:Policyholder | policyholder]] surrenders, a market-wide reliance on similar [[Definition:Derivative | derivatives]] strategies, or a sudden contraction in [[Definition:Reinsurance | reinsurance]] capacity could all generate systemic effects even if no single entity is individually dominant. For national [[Definition:Insurance regulator | regulators]], the framework provides a common vocabulary and set of analytical tools to integrate systemic risk considerations into day-to-day [[Definition:Solvency | solvency]] supervision. For the industry itself, it signals that regulators are watching the forest, not just the largest trees — and that every significant insurer should be prepared to demonstrate that its activities do not contribute to broader financial fragility.

'''Related concepts:'''
{{Div col|colwidth=20em}}
* [[Definition:Systemic risk]]
* [[Definition:Global systemically important insurer (G-SII)]]
* [[Definition:International Association of Insurance Supervisors (IAIS)]]
* [[Definition:Macroprudential supervision]]
* [[Definition:Recovery and resolution planning]]
* [[Definition:Higher loss absorbency (HLA)]]
{{Div col end}}

Definition:Holistic framework for systemic risk - Revision history

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