CEA writes to G20 to thwart “unintended consequences”
The European insurance and reinsurance federation (CEA), has called on the G-20 to note the specific characteristics of insurance when designing regulations to respond to the global financial crisis.
The CEA has published a report highlighting the differences between insurance and banking and making recommendations for the effective regulation of insurers.
Letter to G20
CEA president Tommy Persson has written to Spain’s leader and G20 chair José Luis Rodríguez Zapatero.
He said: “Insurers and reinsurers were neither at the root of the last economic crisis nor the main recipients of subsequent government support. They were obviously affected by the financial crisis, but emerged from it relatively unscathed.
Stabilising effect
“Largely due to their distinct business model, with upfront, long-term funding and relatively little exposure to liquidity risk, they contributed to stabilising the economy and absorbing risks.
“We observe with concern policy responses stemming from G-20 commitments that do not give sufficient recognition to the differences between the insurance and banking business models.
“There appears to be a worrying trend to impose regulation that is designed for one financial services sector to other sectors.
One size does not fit all
“Problems and regulatory responses have been identified primarily in the banking sector, but final recommendations are often presented as being applicable to the financial services sector as a whole, without due consideration of the implications for other sectors.
“The differences between sectors must however be taken into account when designing regulatory regimes.
He warned of “unintended consequences” and “herd behaviour” that might “prevent the insurance industry from performing its stabilising role in the economy effectively”.
