The International Association of Insurance Supervisors (IAIS) has published for consultation an Issues Paper on structural shifts in the life insurance sector, focusing on increased investment in alternative assets and the growing adoption of cross-border asset-intensive reinsurance (AIR). The paper also considers macroprudential and financial stability dimensions and whether IAIS supervisory material may need enhancement. The Issues Paper proposes a principles-based definition of alternative assets as those displaying a high degree of valuation uncertainty, illiquidity or complexity, and discusses supervisory responses such as enhanced reporting and risk management requirements, capital adequacy and governance reviews, and stress testing. On AIR, it highlights that investment and related risks are a significant part of the transfer, with supervisory concerns including complexity, recapture risk, concentration risk and potential weakening of policyholder protection when transactions leverage cross-jurisdictional differences in reserving, valuation, capital requirements and other factors; a quantification exercise for a hypothetical in-payment annuity book is used to illustrate these differences. While current exposure to alternative assets and AIR is described as limited and not seen as creating significant financial stability risks, the paper notes potential transmission channels if growth continues, including forced asset liquidation, pullbacks from lending markets and disruption from mass AIR recaptures. Feedback is requested by Wednesday 19 May 2025 24:00 CEST via the consultation tool, with input to be reflected in a final updated Issues Paper to be published later in 2025. A public background session webinar is scheduled for 3 April from 13:00 to 14:30 CEST.

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