Whilst the banking industry operates under a set of global standards for banking regulation which is set by the Basel Committee, the regulation of global insurance is much more fragmented. So let's have a look at this in a bit more detail, taking it by region. Now we'll start off with Europe. Now for some time, the EU set minimum capital standards for European insurers. However, in 2016, this regime was overhauled and replaced by Solvency II. Now, Solvency II fully harmonized European insurance regulation and it introduced a risk-based solvency framework and also widened the scope of insurance business covered by regulation. So this has been a very dramatic change to insurance regulation in Europe in the recent years. Now, in terms of the US, it's a state-based system and it's supported by the National Association of Insurance Commissioners, or the NAIC. Now, this is a support organization and it's formed of the Chief Insurance Regulators from each of the US states. And it produces standards and best practice guidance to help coordinate regulatory oversight. But it's important to understand that the actual oversight is still provided at a state level. Now, in terms of Asia, clearly it's going to be national regulation and the two key countries we're focusing on here are China and Japan. Now, in terms of China, the key regulations are the C-ROSS framework which stands for the China Risk Oriented Solvency System. And in terms of Japan, they operate the ESR framework which is the Economic Solvency Ratios. It's particularly notable that Japan's ESR share a number of similarities with the Solvency II approach. So there's some read across between these two regions. Now, in terms of future developments to the regulatory landscape, there is some push towards harmonization of insurance regulation. Now, there is a body called the International Association of Insurance Supervisors who are developing a common framework, which is referred to as COM frame. Now, part of this includes developing a global insurance capital standard, which would harmonize at least the methodologies for capital requirements, if not the capital requirements themselves. Now, a stance was issued late in 2019 and it is undergoing a five-year monitoring period which essentially allows field testing of the standard. So we're still some way off of the levels of harmonization which are seen in the banking industry.
