IAIS release initial analysis of systemic risk and the insurance sector
November 10, 2009; The International Association of Insurance Supervisors (IAIS), as the international standard-setting body for the prudential supervision of the insurance industry and a member of the Financial Stability Board (FSB), welcomed the latest G20 Declaration to continue strengthening the global financial system.
The G20 welcomed the new IMF/BIS/FSB report on assessing the systemic importance of financial institutions, markets and instruments. To assist this work, the IAIS is today releasing its initial analysis of the relationship between the insurance sector and systemic risk. Peter Braumüller, Chair of the IAIS Executive noted “the purpose of this analysis is to identify challenges which insurance regulators face which are distinctly different to regulators of other financial institutions.” These challenges include:
· In the insurance sector, systemic insurance risk does not typically generate immediate shock effects, but plays out over a longer time horizon. As a result, the working definition in the IMF/FSB/BIS report on assessing the systemic importance of financial institutions could usefully be complemented with a timing-related fourth sub element (in addition to size, lack of substitutability and interconnectedness), thus capturing all forms of systemic insurance risk; and
· The distinct business model of insurance means that the policy solutions for systemically risky activities will likely differ between sectors. We look forward to working with the BIS, FSB and IMF in developing the framework of appropriate policy responses that is also applicable to insurers.
The working definition of systemic risk provided by the IMF/FSB/BIS is:
‘the risk of disruption to the flow of financial services that is (i) caused by an impairment
of all or parts of the financial system; and (ii) has the potential to have serious negative
consequences for the real economy.’
Fundamental to this definition is the notion that systemic risk is associated with negative
externalities and/or market failure and that a financial institution’s failure or malfunction
may impair the operation of the financial system and/or the real economy.
For analysis on systemic risk and the insurance sector Click here
Global programme to improve access to insurance
Future of insurance markets and supervision
Joint Forum releases final Report on SPEs
IAIS call for rapid progress on financial instruments standards
IAIS supports the G20 Declaration on strengthening the financial system
IAIS takes action on G20 and FSF recommendations
Global reinsurers remain resilient amid financial crisis
IAIS steps up supervisory coordination efforts
CLICK FOR MORE INSURANCE RELATED STORIES
CLICK FOR SPECIAL SECTION ON GLOBAL FINANCIAL CRISIS
CLICK FOR MORE FEATURES & STORIES