The changing regulatory landscape—how will reinsurers respond?
The changing face of regulation was the focus of the second panel discussion of day two of the Singapore International Reinsurance Conference.
The panel was chaired by Michael Marx, managing director of the treaty division Asia Pacific at Hannover Re, who started off with a presentation on recent developments, stating that the industry faced some challenging times.
He pointed out that there had been a wide range of recent regulatory actions by Asian governments, ranging from India—which has raised the foreign direct investmentcap from 26 percent to 49 percent, and allowed foreign insurers to set up branches, to China—which has brought in C-ROSS and made other changes, and finally Indonesia, which has also brought in a number of regulatory changes.
He contrasted this to the Association of South-East Asian Nations (ASEAN), which had yet to bring in any insurance regulations, before asking the panel to consider whether the markets were over-regulated.
Victor Peignet, chief executive officer of SCOR Global P&C, said that capital was the biggest issue for the industry and he stated that after the global financial crisis of 2008 there had been a move to better regulation, with the first moves being in the right direction, with a shift towards global prudential standards.
However, after that things moved in a different direction and despite—or perhaps because of—the introduction of Solvency II in Europe, regulatory fragmentation regained the upper hand as different governments introduced various layers of their own regulation, depending on their own reaction to Solvency II.
Peignet added that bank stability was conflicting with non-bank stability and that there was now a global trend towards economic risk-based solvency regulation
Ian Johnston, chief executive of the Dubai Financial Services Authority, was able to provide delegates with some comments from the standpoint of a regulator and asked the question: why is the landscape changing?
Johnston pointed out that there was now a more international market for re/insurers, who were writing more business on a cross-border basis.
In addition there had been a response to the global financial crisis of 2008, which had resulted in more power being concentrated on the G20, the Financial Stability Board, the International Association of Insurance Supervisors (IAIS), Basel, and so on.
As a result there was a focus on system stability and therefore more focus on global standards.
James Beedle, senior managing director, Willis Re Asia, pointed out that equivalence had swiftly become a political hot potato and that the result had been something of a series of compromises.
Beedle said that the IAIS was now growing in importance and that insurers need to embrace global regulation and to use it as an opportunity to compete.
He added that in the absence of global equivalence, insurers had to find ways to navigate local versus home jurisdiction regulatory requirements, to use regulation as a positive way to engage clients and to cultivate a strong collective voice at the regulatory level.
Hans-Peter Gerhardt, group chief executive-designate of ACR Capital Holdings, pointed out wryly that equivalence was a great idea, but that the industry was still a long way from it.
One final point brought agreement from the panel. It was stressed that the global financial crisis has been born out of the failure of the investment banks and that with the exception of AIG the re/insurance industry had not really been affected by it. As a result regulators needed to remember that re/insurers were not banks.
