CEA argues that the business model and risk profile of insurers make them so distinct from banking sector that it is inappropriate to apply regulatory responses, mainly focused on the banking sector, to the financial services sector as a whole.
The CEA, the European insurance and reinsurance federation, has called on the G-20 to take full account of the specific characteristics of insurance when designing regulatory initiatives to respond to the global financial crisis. The CEA has also today published a report highlighting the fundamental differences between insurance and banking and making recommendations for the effective regulation of insurers.
In its report, the CEA warns of the risk of applying regulatory solutions developed for the banking sector to insurance. It argues that the distinct business model and risk profile of insurers make it inappropriate to apply regulatory responses that are mainly focused on the banking sector to the financial services sector as a whole.
Launching the report, CEA president Tommy Persson said: “The G-20 is leading the way in important efforts to coordinate and enhance the regulation of the global financial system. We urge the G-20 leaders to recognise in their work that insurance is a unique and distinct sector.
“We strongly believe that regulatory frameworks adapted to each of the financial services sectors is the best way to guarantee that financial sectors behave in different ways, thus avoiding the danger of “herd behaviour”, in which all financial services sectors behave in the same way.
That would damage the potentially stabilising role insurance plays in the global economy.”
The CEA report, entitled “Insurance: a unique sector — Why insurers differ from banks”, includes 12 recommendations of ways to strengthen regulatory and supervisory frameworks for insurers while still taking into account the strength of the insurance business model.
The recommendations include calls to address regulatory gaps; to target unregulated entities; to avoid excessive regulatory reaction to the crisis; and to avoid the inappropriate read-across of regulation to insurance from other sectors. They also include calls for debates on financial services taxes to recognise the different risks posed by different financial institutions; and for the cumulative effects of proposed macro- and micro-prudential measures and tax measures to be considered.
© CEA - Comité Européen des Assurances
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