19 February 2011

Geneva Association: Core insurance activities do not cause systemic risk

This view is shared by the world’s leading insurers given that the core activities of insurers do not pose a systemic risk.

Extensive Geneva Association analysis published in 2010 and recently refined demonstrates that core insurance activities are not a threat to the stability of the financial system. This is a result supported not only by the global insurance industry, but also by prominent government leaders, politicians, national regulators and industry experts.

The same research indicated that there are two non-core insurance activities that have the potential, in certain circumstances, to be systemically risky (derivatives speculation/financial guarantees and the mismanagement of short-term funding). New analysis shows that a focus on activity-based indicators (not institutions) will target these potential sources of systemic risk whilst also reducing the regulatory resources required for supervision and the scope for regulatory arbitrage.

Full letter

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