Financial stability and insurance: IIF colloquium hosted by Swiss Re and Zurich Insurance Group

The Institute of International Finance (IIF) recently held its International Colloquium on “Financial Stability and Insurance” at the Centre for Global Dialogue. Hosted by Swiss Re and Zurich Insurance Group, the event attracted leaders from the insurance sector, regulators and industry associations.

A constructive dialogue took place between the official sector and the re/insurance industry on 9-10 July, when the Institute of International Finance (IIF) held an international colloquium on “Financial Stability and Insurance” at the Swiss Re Centre for Global Dialogue in Rüschlikon. The meeting was hosted by Swiss Re and Zurich Insurance Group and attracted leaders from the insurance sector, regulators and industry associations.

Discussion revolved around the International Association of Insurance Supervisors’ (IAIS) proposed methodology for assessing potential Globally Systemically Important Insurers (G-SIIs), which was released on 31 May for a two-month consultation period. Further discussions were held on the IAIS’s preliminary thoughts regarding policy measures, the role of supervision for potential systemically risky activities, and the coordination of evolving policy approaches.

The debate regarding regulation in insurance is currently at a critical point. In addition to the proposed IAIS methodology, a new consultation period began in July for the Common Framework (ComFrame) for the Supervision of Internationally Active Insurance Groups. These reforms are part of the wave of new regulations which has swept over the financial sector since the 2008/2009 financial crisis revealed regulatory, corporate and macro-economic flaws. At first, many of the new initiatives focused on the banking sector. However, it soon became clear that the insurance industry, despite the resilience it had displayed throughout the crisis, would be swept up in the rearrangement of the global financial architecture.

Through this high-level IIF event, the insurance industry raised concerns that regulations from the banking sector will be applied indiscriminately to insurers and reinsurers – particularly concerning systemic risks as the IAIS methodology is very much aligned with the BCBS indicator-based approach and the proposed measures based on the FSB banking recommendations. In some instances, regulations are attempting to solve problems which do not actually exist in the insurance sector, such as the “too big to fail” issue, and run the risk of introducing new risks, such as “moral hazard” and market distortions.

In 2011, the IIF released an important study, The Implications of Financial Regulatory Reform for the Insurance Industry, addressing these specific developments. The report, to which Swiss Re and Zurich Insurance Group were key contributors, calls for greater cross-sectoral coordination between banking and insurance in regulatory reform. It emphasises the important role that insurers play as long-term investors in the real economy, and highlights the challenges currently experienced by the sector as a result of financial market volatility. The report warns that uncoordinated regulatory reforms will be less effective in promoting financial stability and will undermine the ability of insurers and banks to undertake their core functions in supporting economic activity and recovery.

Published 19 July 2012


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