Insurance Companies Want to be Distinguished from Banks

Update:

see source

G-SIFI’s means =  “globally systemically important financial institutions”

It is surprising that a number of insurance companies want to be treatly differently from banks, when a number of banks actually own these insurance companies.

The Canadian Life and Health Insurance Association and the Insurance Bureau of Canada has joined 20 other insurance associations is asking the leaders of the G20 to treat insurers differently from banks as they proceed with regulatory reforms in response to the financial crisis.

A letter from the group raises concerns about the process currently underway at the International Associations of Insurance Supervisors for determining globally systemically important financial institutions. It’s expected that such G-SIFIs will be subject to more stringent rules in recognition of the fact that their failure could impact the entire financial system.

The insurance associations calls for policymakers to pursue a distinct timetable for identifying such firms in the insurance business from the Financial Stability Board’s work to do the same for banks.

“We make this appeal to you and your G20 colleagues on the grounds that there are a number of business and regulatory characteristics that distinguish the insurance sector from banking,” the CLHIA and IBC say in a separate letter letter to Canadian Prime Minister Stephen Harper.

Joint submission in the form of a letter by the Canadian Life and Health Insurance Association (CLHIA) and the Insurance Bureau of Canada(IBC).

Letter to G20 Leaders on G-SIFIs and insurance

Release Date: 06/06/2011 Staff Reference: Janice Hilchie
Dear Prime Minister:

On behalf of Frank Swedlove, President of the Canadian Life and Health Insurance Association (CLHIA) and Donald Forgeron, President of the Insurance Bureau of Canada (IBC), please find attached a letter signed by the CLHIA and IBC, as well as 20 other national and regional insurance associations from around the world. The letter raises shared concerns about the process currently underway at the International Associations of Insurance Supervisors (IAIS) for the determination of globally systemically important financial institutions (G-SIFIs) in insurance. We ask that you and your G20 colleagues give due consideration to the request found in the letter for a separate timeline for the determination of G-SIFIs in insurance.

cc: The Honourable Jim Flaherty, P.C., M.P.
Jeremy Rudin, Assistant Deputy Minister, Department of Finance
Paul Rochon, Associate Deputy Minister, Department of Finance
Julie Dickson, Superintendent of Financial Institutions, OSFI
Mark Carney, Governor, Bank of Canada

 

June 6, 2011

The Right Honourable Stephen Harper, P.C., M.P. Prime Minister of Canada House of Commons Ottawa, Ontario K1A OA6

Dear Prime Minister:

On behalf of the Canadian Life and Health Insurance Association (CLHIA) and the Insurance Bureau of Canada (IBC) we would like to bring to your attention the attached letter, signed by us as well as 20 other national and regional insurance associations. The letter raises shared concerns about the process currently underway at the International Associations of Insurance Supervisors (IAIS) for the determination of globally systemically important financial institutions (G-SIFIs) in insurance.

The letter conveys our request for de-linking the timeline for the identification of G-SIFIs in insurance at the IAIS from the Financial Stability Board’s (FSB’s) work streams on banks. We make this appeal to you and your G20 colleagues on the grounds that there are a number of business and regulatory characteristics that distinguish the insurance sector from banking. We note that the FSB has devoted considerable time towards, and has largely focused on, identifying areas of systemic risk in banking. For insurance, on the other hand, we feel that the IAIS’s timetable for the identification of G-SIFIs does not provide adequate time to conduct any robust and detailed analysis on what, if any, potential sources of systemic risk exist in our sector. The risk, as we see it, is that the G-SIFI methodology being developed for insurers will either be flawed or that it will simply mirror inappropriately the methodology being applied to banks.

We therefore ask that you and your G20 colleagues give due consideration to a separate timeline for the determination of G-SIFIs in insurance.

Should you wish to discuss this matter further, please do not hesitate to have your officials contact us.
Sincerely,
________________________________ ____________________________
Frank Swedlove Donald W. J. Forgeron
President President
Canadian Life and Health Insurance Association Insurance Bureau of Canada

cc: The Honourable Jim Flaherty, P.C., M.P.
Jeremy Rudin, Assistant Deputy Minister, Department of Finance
Paul Rochon, Associate Deputy Minister, Department of Finance
Julie Dickson, Superintendent of Financial Institutions, OSFI
Mark Carney, Governor, Bank of Canada
FS:252

 

The joint submission (aka a “letter”) by the Canadian Life and Health Insurance Association & the Insurance Bureau of Canada

June 6, 2011

Dear Leaders of the G20:

The undersigned life and health and property and casualty insurance associations, (representing 78% of global insurance and reinsurance business), are writing to you in order to share with you some critical concerns we have about the process, currently underway, for the determination of globally systemically important financial institutions (G-SIFIs).

The global insurance and reinsurance industry requests consideration by G20 leaders that the timelines for the identification of G-SIFIs in insurance be de-linked from the Financial Stability Board’s (FSB) work streams on banks. We feel this is necessary because, to date, the FSB’s work has justifiably concentrated on banks. We believe that the FSB should set out a separate timeframe for its work on potential sources of systemic risk in insurance, recognizing that discussions on this topic in insurance are at a less advanced stage than elsewhere in the financial services space.

The FSB has been actively working on identifying systemic risk in banking for some time (its paper identifying the three criteria of size, interconnectedness and substitutability was published in November 2009) yet a similar process has not been conducted in insurance. A timeframe for detailed analysis should therefore be granted to assess potential sources of systemic risk in the insurance sector before any methodology for G-SIFI identification is developed. To simply superimpose the methodology for G-SIFI banks on insurers would, we believe, be a mistake.

There are sharp differences between the banking and insurance business models. As well, the insurance regulatory model already includes strong upfront solvency standards and robust resolution procedures, and the International Association of Insurance Supervisors (IAIS) is working on enhancing the global aspects of insurance supervision. We therefore urge that the consideration of systemic risk in the insurance sector be carried out separately from banking. A separate timeline would allow the FSB to carefully assess and properly understand the unique business and regulatory characteristics of the insurance sector. Only then will it be in a position to decide on the appropriate methodology to identify and address potential systemic risks in insurance. The de-linkage will also alleviate the staffing and resource bottlenecks being experienced by the FSB and its members.

Furthermore, we urge that a broad community of policymakers and prudential supervisors should be included in the decision-making process for insurance.

We remain an industry supportive of strong regulations drafted and enacted according to our respective constitutional, legislative and regional requirements. We would be pleased to discuss this matter with you at your convenience.

Sincerely,
American Council of Life Insurers (ACLI)
American Insurance Association (AIA)
Asociación de Aseguradores de Chile (AACh)
Asociación Mexicana de Instituciones de Seguros (AMIS)
Association of Mutual Insurers and Insurance Cooperatives in Europe (AMICE)
Association of Bermuda Insurers and Reinsurers (ABIR)
Association of British Insurers (ABI)
Brazilian Insurance Confederation (CNSeg)
Canadian Life and Health Insurance Association (CLHIA)
Dublin International Insurance & Management Association (DIMA)
The Dutch Association of Insurers
European Insurance and Reinsurance Federation (CEA)
Federación Interamericana de Empresas de Seguros (FIDES)
French Federation of Insurance Companies (FFSA)
The Geneva Association
German Insurance Association (GDV)
Group of North American Insurance Enterprises (GNAIE)
Insurance Bureau of Canada (IBC)
Insurance Council of Australia (ICA)
The Irish Insurance Federation
Property Casualty Insurers Association of America (PCI)
Reinsurance Association of America (RAA)

They point out that the FSB has devoted considerable time to identifying areas of systemic risk in banking. For insurance, they argue that the IAIS’s timetable “does not provide adequate time to conduct any robust and detailed analysis on what, if any, potential sources of systemic risk exist in our sector.”

“The risk, as we see it, is that the G-SIFI methodology being developed for insurers will either be flawed or that it will simply mirror inappropriately the methodology being applied to banks,” it says.

“We therefore urge that the consideration of systemic risk in the insurance sector be carried out separately from banking” adds the letter to all the G20 leaders. “A separate timeline would allow the FSB to carefully assess and properly understand the unique business and regulatory characteristics of the insurance sector. Only then will it be in a position to decide on the appropriate methodology to identify and address potential systemic risks in insurance. The de-linkage will also alleviate the staffing and resource bottlenecks being experienced by the FSB and its members.”

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