Global insurance watchdog consults on new capital regime
By Chris Vellacott
LONDON (Reuters) - The global insurance watchdog has launched a consultation on how to set up a new system making key firms hold enough capital to avoid a collapse that would pose a risk to the financial system.
The International Association of Insurance Supervisors (IAIS) on Monday released its proposed options for the development of 'basic capital requirements' for insurers it deems 'globally systemically important'.
The IAIS is inviting responses by February 3 on how to run a system that assesses cross-border risks to firms in cases where it can be difficult to draw meaningful comparisons given different types of assets and exposure.
The IAIS aims to test the new capital requirements next year, before developing a system of "higher loss absorbancy" rules for insurers.
Regulators identified an initial list in July of nine insurers including AIG , Allianz and the UK firms Aviva and Prudential that it considered systemically important.
This implied they could spark a financial crisis should they become insolvent by setting off a chain reaction through the industry because of their links with other institutions around the world.
The announcement angered some in the industry who argued that insurers, unlike banks, did not cause the financial crisis and should not face a similar regulatory crackdown.
World leaders in the Group of 20 top economies (G20), which have already approved a similar regime for 28 of the world's top banks, have called for the sector to introduce tougher capital standards by 2019.
The IAIS said on Monday the key risks faced by systemically important firms were primarily related to insurance liabilities, although they are also vulnerable to fluctuating asset prices through their investments.
It said it aimed to ensure the interactions between different types of risk are considered as well as the distinctions within insurance such as life and non-life liabilities.
(Reporting by Chris Vellacott; editing by Tom Pfeiffer)
