Geneva Association: Core insurance activities do not cause systemic risk

19 February 2011

In an open letter to Finance Ministers and Central Bank Governors of the G20, the Geneva Association expressed its concern at the political decision taken to develop a list of insurance SIFIs.

This view is shared by the world’s leading insurers given that the core activities of insurers do not pose a systemic risk.

Extensive Geneva Association analysis published in 2010 and recently refined demonstrates that core insurance activities are not a threat to the stability of the financial system. This is a result supported not only by the global insurance industry, but also by prominent government leaders, politicians, national regulators and industry experts.

The same research indicated that there are two non-core insurance activities that have the potential, in certain circumstances, to be systemically risky (derivatives speculation/financial guarantees and the mismanagement of short-term funding). New analysis shows that a focus on activity-based indicators (not institutions) will target these potential sources of systemic risk whilst also reducing the regulatory resources required for supervision and the scope for regulatory arbitrage.

Full letter

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