International perspectives on solvency modernisation: Mexico



New development

Congressional Directive: Ley de Instituciones de Seguros y Fianzas •Scope of regulation: The new regulation will apply to all Mexican re/insurers.

What's changing

Mexico currently has a factor-based capital requirement framework differentiated per line of business, except for natural catastrophe lines of business, where a special requirement applies (1500-year return period PML based on a local NatCat model). The current framework will be replaced by a risk-sensitive principle-based approach to capital requirements and supervision. The local regulator has strongly emphasised that it will be a "Solvency II type regulation" with the same principles, but adapted to the Mexican insurance industry. 

Current status

The new regulation is expected to be enforced starting January 2014. As of late 2011, the insurance industry is awaiting the approval in Congress of the directive (Ley de Instituciones de Seguros y Fianzas) and the publication of the secondary legislation which would set the application framework of the former (including the technical specifications). After the publication of such rules, there will be discussions between the different parties in the insurance industry in Mexico, including the insurers association, the actuarial associations and the regulator, to come up with a final draft of the regulation.

Similarity with Solvency II

Risk-based regulatory framework with three pillars, considering the existence of a standard formula for the calculation of capital requirements and the possibility of insurers to develop an internal model with the approval of the regulator. The regulation is based on a directive in the form of the new "Ley de Instituciones de Seguros y Fianzas" and a secondary legislation in charge of the Insurance Commission (CNSF) specifying the application of the directive and condensed in the "Circular Única".

Published 13 December 2011

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