After the crisis: the new regulatory environment

One of the key lessons from the financial crisis is that regulations need to better reflect the globalisation that has occurred in the financial sector in recent decades. The fragmented network of regulatory regimes that exists today cannot cater to the international character of the world’s large insurance and reinsurance companies.

The insurance and reinsurance industry continues to face tremendous challenges in the years ahead. The ever-changing risk landscape and regulators’ and shareholders’ demands for greater transparency will require the industry to give ever greater detail on its operations. A regulatory framework is required that instils and preserves confidence in the financial health of the industry while accommodating its unique characteristics and global needs. Steps towards this global approach are underway, even if there is still a considerable distance to go.

From a regulatory perspective, the insurance and reinsurance industry faces substantial changes in many of the major markets. In the United States, where insurance supervision is state-based, the industry has been trying hard to modernise the overall regulatory framework. In Europe, Solvency II and similar frameworks like the Swiss Solvency Test (SST) have introduced a more holistic view of all risks. Solvency II will rely on market-consistently valued assets and liabilities. By setting the path towards a economic and risk-based regulation, regulatory frameworks like these set a new benchmark for other countries to follow.