Definition:Global monitoring exercise
🌍 Global monitoring exercise is a supervisory data-collection and analysis process conducted by the International Association of Insurance Supervisors (IAIS) to track trends, vulnerabilities, and systemic risks across the global insurance sector. Launched as part of the IAIS's post-financial-crisis reforms, the exercise reflects the growing recognition that systemic risk in insurance cannot be assessed by examining individual companies in isolation — it requires a macroprudential view of how interconnectedness, concentration, and market-wide behaviors may amplify shocks across borders and sectors.
⚙️ The exercise collects granular financial and risk data from a pool of large, internationally active insurance groups and reinsurers on an annual basis. Participating firms — typically among the world's largest by premium volume and total assets — submit data covering areas such as interconnectedness with the financial system, non-traditional and non-insurance activities, liquidity risk, counterparty exposures, and asset-liability management characteristics. The IAIS analyzes this data to identify sector-wide trends — for example, growing reliance on alternative capital, shifts in asset allocation toward less liquid investments, or increasing cyber risk accumulations. The results feed into the IAIS's annual Global Insurance Market Report and inform its policy development, including the design of the Insurance Capital Standard and the Holistic Framework for systemic risk. Importantly, the exercise replaced the earlier approach of designating individual firms as globally systemically important insurers (G-SIIs), shifting toward an activities-based approach to systemic risk monitoring.
💡 The practical impact of the global monitoring exercise extends well beyond the firms that directly participate. Its findings shape the regulatory agenda at both international and national levels, influencing how supervisors in major markets — from the NAIC in the United States to EIOPA and supervisory authorities in Asia — approach emerging risks and capital requirements. For large insurers and reinsurers, participation involves significant data-reporting obligations, and the exercise's analytical conclusions can prompt supervisory follow-up or policy changes that affect business strategy. The shift from entity-based G-SII designations to the activities-based Holistic Framework — of which the global monitoring exercise is a core pillar — represented a fundamental evolution in how the international supervisory community approaches insurance systemic risk, favoring ongoing, data-driven surveillance over static labeling of individual firms.
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