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As global insurance supervisors prepare to meet in Taipei for their annual conference this week, reinsurers have launched a pre-emptive defence against being given a label that could lead to higher capital requirements.
Regulators have already deemed primary insurance companies including AIG, Axa and Prudential globally “systemically important” as part of a worldwide push to make the financial system safer. But they have so far avoided including leading reinsurers – many of which are larger than primary insurers and include companies such as Swiss Re, and Munich Re and the Lloyd’s of London market – on the list. The regulators said they need more time to assess their complexity.
In determining the list of too-big-to-fail reinsurers, regulators plan to focus on the “non-traditional” and “non-insurance” business the groups do – as was the case with primary insurers. Reinsurance companies assume risks from insurance companies in return for premiums. Some insurers pass on nearly all of their risks to reinsurers. Several large groups write both insurance and reinsurance.
In a paper distributed last week by the Geneva Association, the insurance industry trade body, the head of Scor, the French reinsurer, sought to dispel what he called “ill-founded fears” about the sector. “Putting [reinsurers and insurers] in the same basket as banks and other financial institutions is misguided", said Denis Kessler, Scor’s chairman and chief executive, the fifth-biggest reinsurer in the world by premiums. “Reinsurance in particular is by no means a systemic threat – instead, it has stabilising virtues.”
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