Dear friend,
As we were about to hit the button and send the latest InsuranceERM alert to you we caught a little flicker of an email out of the corner of our eye from no less a body than the Financial Stability Board (FSB) and, this being November, our interest was more than a little piqued.
This is the month, after all, when the long-awaited decision of the FSB relating to its update of the list of global systemically important insurers (G-SIIs) was expected. What's more, this would also see the announcement of the first ever list of globally systemic reinsurers.
The debate has been a furious one, as regular readers will be aware. Only last week John Huff, director of the Missouri Department of Insurance and one of the leading figures in the systemic risk debate, was typically outspoken in these pages on the subject: "We should not just add capital to manage systemic risk, but we should target the activities that cause systemic risk and, eventually, eliminate it."
His comments go the heart of the matter, as the designation of systemic importance is no laughing matter for those insurers on the list, as it involves enhanced supervision, the development of resolution plans, and the potential for greater capital requirements.
For reinsurers, the potential designation has been even more vexatious, as they have long argued that they simply do not represent a systemic risk. Scor's Denis Kessler has been particularly outspoken on the subject, noting for instance that the failure of a reinsurer is, in general, an orderly and lengthy process, and that if a reinsurer fails market capacity is available to take its place.
In this context, the decision of the FSB was going to be fascinating. How far would they go? Who would be on the list?
Well ladies and gentlemen, the surprise is… the list of G-SIIs is unchanged from the nine currently designated. And the list of reinsurers is… well, let me quote:
"The FSB has consulted with the International Association of Insurance Supervisors and national authorities and has decided to identify for 2014 the nine G-SIIs identified in 2013 and to postpone a decision on the G-SII status of reinsurers, pending further development of the methodology."
Reading between the lines, it looks like we will have to wait until 2016 for a decision now. Am I surprised? Given the pace of re/insurance regulatory change in recent years, I suppose not. This gives reinsurers a breathing space, and more time to argue their case. Perhaps in the intervening period they may even be able to push the issue off the agenda altogether…
Marcus Alcock,
Editor, InsuranceERM
Companies:FSB