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Insurers' interconnectedness under scrutiny

Thursday 28 October 2010 - by Andrew Hickley

The chairman of the UK Financial Services Authority says analysing the interconnectedness of insurers is a “key priority” which will require close cooperation between regulators.

Speaking at the International Association of Insurance Supervisors’ Annual Conference in Dubai yesterday, Lord Turner said that even though insurance firms were not at fault for the financial crisis, the industry would be naïve to ignore the need for improved regulation in an increasingly intertwined industry.

He said: “We need to make the analysis of interconnectedness and how it changes over time a key priority, a task which will require close working cooperation between insurance and banking regulators.

“Whatever the quality of our regulators, and of our analysis of emerging systemic markets, it is clear that enhanced supervision and cooperation between regulators will be vital.”

Lord Turner said that the UK supports the IAIS’s proposed worldwide framework, which promotes insurance accounting standards, alongside the need for supervisory colleges and cooperation on crisis management and cross-border resolution.


While he admits to the operational challenge of constructing a workable globalised regulatory structure, he said the behaviour of banks when creating Basel III gives him hope that the regulation could be adopted.

“There are clearly major legal barriers to establishing an international framework, but we should avoid seeing these as insurmountable.

"On the banking side, Basel III is evidence that, however difficult the process may seem, international agreement is possible.”


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