Kathmandu. The International Association of Insurance Supervisors (IAIS) has identified three major challenges to global insurance supervision.
Releasing the half-yearly review of the Global Insurance Market Report 2025, IAIS highlighted geoeconomic fragmentation, private debt investment and artificial intelligence (AI) as the main challenges.
Geoeconomic fragmentation
Growing geopolitical tensions and economic divides are creating significant challenges for insurers, including debt, foreign exchange, liquidity, interest rates and risk assessment risks. Insurers are addressing with robust risk management strategies such as asset redistribution, scenario testing, and crisis response planning.
Private sector debt investment
Global private debt investment reached $210 billion in 2023, according to research by the International Monetary Fund. North America has an annual growth rate of 20 per cent, Europe 17 per cent and Asia 20 per cent. Insurers are balancing diversification of investment in private debt and stable long-term cash flow benefits with risks such as debt, concentration, liquidity and valuation challenges. IAIS is conducting an in-depth analysis of insurers’ private debt investments to better understand potential risks and refine supervisory practices.
Artificial Intelligence (AI)
AI provides opportunities for insurers to improve efficiency and improve risk selection leading to better consumer outcomes. However, the risks that require strong governance and risk management are also highlighted. IAIS is examining the process of adopting AI in the insurance sector. It focuses on insurers’ operations, financial balance and its impact on risk management frameworks.
Other areas of increasing supervisory attention
Areas that need further emphasis for analysis include cyber risks and climate-related risks. The IAIS considers the extent to which insurers are able to identify cyber risks, implement policy exclusions transparently, and manage their underwriting exposure. Finally, the Global Insurance Market Report will again include an assessment of climate-related risks in a dedicated chapter.
“The half-yearly review report emphasizes the continued resilience of the insurance sector, the state of liquidity, liquidity and profitability remain strong and the systemic risk score remains stable,” IAIS Secretary General Jonathan Dixon said. The 2025 report reflects IAIS’ commitment to identify and respond to emerging risks in the insurance sector. ’
Based on preliminary findings from the IAIS’ 2025 Global Monitoring Exercise, the report analyses emerging trends and risks within the global insurance sector. “The half-yearly report provides timely insights into the evolving challenges and opportunities for the global insurance sector,” said Shigeru Arizumi, Chairman, Executive Committee, IAIS, “By identifying emerging risks and trends such as geoeconomic fragmentation, increased investment in private debt and increased use of artificial intelligence, IAIS equipped its members with the knowledge needed to strengthen supervisory practices and promote sector stability in the face of rapid change. does. ’
Interim results
The interim results have highlighted overall stable liquidity and profitability positions in the global insurance sector. Which is supported by strong operational performance, effective asset-liability management and strong capital buffers. Liquidity conditions have also improved for many insurers. However, some challenges remain due to increased allocation of liquid assets, market volatility and dividend payments.
At the end of 2024, the overall systemic risk scores of global insurance groups were similar to those at the end of 2023. Although some indicators showed growth, it was offset by a decrease in indices linked to minimum guarantees on variable products and derivatives holdings.
Global economic growth is expected to slow in 2025 driven by trade conflicts, market volatility and rising debt challenges. Disorganized constraints in financial markets can affect insurers’ balance sheets by weakening asset valuations and challenging liability management. Diversification, however, has helped maintain stable returns.
