Nine international insurers have been named as posing a risk to the global financial system by the Financial Stability Board (FSB), a panel of the G20 of leading economies. The ruling places them on the same elevated risk and capital requirement platform as the Systemically Important Financial Institution (SIFI) banks like Deutsche Bank or Citi.
The Financial Stability Board (FSB), which is coordinating global efforts to reduce the risk of financial calamity and is based in Basel, Switzerland, named three US insurance groups - American International Group (AIG), MetLife and Prudential Financial - in its list of so-called global systemically important insurers.
The five European insurers identified by the FSB included the UK’s Aviva and Prudential, Germany’s Allianz, France’s Axa and Italy’s Assicurazioni Generali, while China’s Ping An Insurance was the other group to make the list. All nine are subject to higher capital requirements and other yet-to-be-determined conditions. For the US trio, specific requirements have not yet been spelled out by the national regulator.
“A sound capital and supervisory framework for the insurance sector is essential for supporting financial stability,” said Mark Carney, chairman of the FSB and the Bank of England’s (BoE) new governor from the start of this month.
AIG’s Past History Guaranteed Placing
Earlier this year, AIG was named as systemically important by a US federal panel, which is not surprising considering its collapse immediately after Lehman brothers went bust on 15 September 2008. The insurer, recipient of a multi-billion dollar government bailout packages during the 2008 financial crisis after failing to control its dealing in credit default swaps (CDS), did not challenge the verdict. In response to the latest FSB’s decision, an AIG spokesman said: “AIG looks forward to working with our international, federal and state regulators to develop a regulatory framework for large global insurers that is both robust and consistent.”
The International Association of Insurance Supervisors (IAIS), which worked with the G20 panel on a methodology for assessing insurers and has proposed policy measures for them, stated on its website that potential for systemic risk increases “where insurers significantly deviate from the traditional insurance business model and particularly where they engage in non-traditional insurance or non-insurance activities.”
The supervisor group also noted that “for most lines of business there is little evidence of traditional insurance either generating or amplifying systemic risk within the financial system or in the real economy.”