AIG’s collapse has nonetheless created serious hurdles for insurance regulators and executives as they seek to persuade politicians and the public that large insurers should not be penalised by the creation of a system-wide financial stability regime.
The International Association of Insurance Supervisors says its members urgently need to present a more sophisticated view of sector risks, so they can make a stronger case to lawmakers.
Many are hoping to make significant headway towards agreement on these issues at the annual global supervisors’ gathering in Dubai this week.
Howard Mills, a partner at Deloitte in the US and a former New York Insurance Supervisor, argues the main problem is that the public does not understand how insurance works. “People have the view that big insurers are definitely systemically risky and politicians are definitely reacting to that,” he says.
The matter has become pressing for the insurance industry now that many of the most urgent regulatory issues for the banking sector have been settled with the Basel III capital rules.
Systemic risk is the threat that the failure of one financial institution causes significant disruption to, or even the collapse of, the broader financial system.
© Financial Times
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