Insurers have dealt effectively with systemic risk, insists Jacques Aigrain at the World Insurance Forum
European regulators should not be temped to make Solvency II more conservative as a reaction to the current credit crisis affecting the banking industry.
This was the warning from Jacques Aigrain, CEO of Swiss Re, speaking at the World Insurance Forum in Dubai.
He pointed out that, unlike ailing banks such as Northern Rock, insurers don’t get bailed out by their central banks. “We do not have a land of last resort,” he said.
There have been suggestions that the European Commission may seek to increase capital requirements for insurance securitisation transactions in a knee-jerk reaction to systemic risks that have arisen in the banking industry.
In an impassioned plea to the regulators, Aigrain said there was little systemic risk in the insurance industry. “I am vehement about the fact that the insurance industry has already been acting in a far more cautious manner – we would take the wrong lesson from the banking industry [if Solvency II revisions are made].”
“We are dependent on each other – there is very little systemic risk within the insurance industry and we already work with substantially more capital for the same level of risk [than the banking industry].”
“There is very little systemic risk within the insurance industry
Jacques Aigrain
“I hope the regulator will have an appropriate approach that the industry has not done a bad job so far,” he concluded to applause from the audience.
“I don’t see that there will be a big roadblock put up on Solvency II,” reassured Greg Case, CEO of Aon Corporation.
XL Capital president and CEO and acting chairman Brian O’Hara said that, unlike the banking industry, insurers had already learnt their lessons about systemic risk during the LMX spiral.
This spiral at Lloyd’s was created when players reinsured each other to the extent that they were literally passing the same risks around the market.
“The danger is when there is a false sense of security when transferring risk to a third party,” warned O’Hara. “The banks are now learning something that we went through some 10-15 years ago.”
