13 March 2013

Risk.net: Designation of systemically important insurers hit by delay

The delay, experts suggest, may have been due to the complex administrative process for identifying the relevant insurers and the FSB's workload.

Philippe Brahin, head of governmental affairs and sustainability at Swiss Re, based in Zurich, says: "The delay is rather mechanical [in nature]. The process is quite complex: the IAIS has to meet, has to agree, has to draft the paper, then it has to go and meet with the FSB subcommittee, then the FSB subcommittee goes to the main board." "In addition, the FSB has other issues on the agenda with the banks, shadow banks and other reforms [to the financial system]", he adds. Brahin expects the initial list to be published in June or July this year.

Neither the IAIS nor the FSB would comment on the reasons for the delay. Eva Hüpkes, adviser on regulatory policy and cooperation at the FSB in Basel, says: "Progress is being made by the IAIS in developing and testing a methodology for identification of G-Siis, and in developing appropriate policy measures. This work should be completed in the second quarter of 2013. The exact publication date is not known at this stage."

Insurers have a number of concerns over the proposals for the identification and supervision of G-Siis, particularly the weighting given to size in the current identification methodology, and the definition of non-traditional and non-insurance (NTNI) business.

The IAIS's proposed policy measures for G-Siis, published in October 2012, cited the writing of variable annuities and issuance of credit default swaps (CDSs) as potential examples of NTNI.

Last month, industry think-tank the CRO Forum published a report questioning the IAIS's thinking. The CRO Forum argued that only bank or bank-like (shadow banking) activities operated on a broad scale within (re)insurance groups or conglomerates, and which were poorly managed and supervised, may present a risk to the wider system. This, the forum, said ruled out credit insurance, derivatives trading for asset-liability management purposes, CDSs and variable annuities as being NTNI activities.

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