Several global insurance companies are facing tighter regulations and potentially higher capital requirements as regulators have concluded that they are critical to the global financial systems.
Originally causing upset amongst the nine insurance companies named, many of whom hit out against the plans claiming an unfair comparison to the banking industry, these regulations are designed to be the first step in addressing the risks associated with significant financial organisations. Changes include more tight supervision by national regulators and “living wills” which are designed to make it easier for the insurers to shut in a crisis.
Amongst the “Global Systematically important financial institutions” (GSifis) were; the UK’s Aviva and Prudential; the US’s AIG, MetLife and Prudential Financial; Italy’s Assicurazioni Generali; Germany’s Allianz; France’s Axa; and China’s Ping An Insurance. These insurers join a group of 28 banks that were designated GSifis last year; Reinsurers will go through the same process next year.
Those opposed to stricter regulations that might force the largest groups to hold more capital have argued that the insurance sector came out of the financial crisis in 2008 a lot better than the banking sector, with only AIG receiving government assistance. Some have said that it should focus on the specific activities that pose a risk not the insurance companies themselves.
To read the document, see below.