Responding to media calls, Patrick M. Liedtke, Secretary General and Managing Director of leading international insurance think tank, The Geneva Association, today outlined key issues for the insurance industry in 2011. He selected two near-term issues, regulation and financial stability, and two longer term issues, climate change and demographics, from the set of issues that the Association is working on. His comments were as follows:
“The direction of international insurance regulation is going to be critical for the industry this year. Major regional projects such as Solvency II, which have gained reference status even beyond Europe, and global projects such as International Financial Reporting Standards (IFRS) reforms and several International Association of Insurance Supervisors (IAIS) initiatives will see key decisions in 2011. We are working with international regulators and standard setters such as the IAIS, the International Accounting Standards Board (IASB) and others to help them tackle the complex questions of how to best regulate and supervise the insurance industry. We are achieving this through the provision of factual analysis and additional knowledge for these discussions with a view to achieving the most efficient insurance solutions in the future regulatory framework. Getting this next wave of regulation right is critically important, not only for the industry, but also for continued economic growth and development.
“The G-20 has tasked the Financial Stability Board (FSB) with addressing and solving the problems surrounding the resilience of the global financial system. While systemic threats do not emanate from insurance activities there are a number of issues that remain poorly understood or simply have not been discussed but where important decisions will be taken by governments in 2011. The role of insurance companies that operate as financial conglomerates carrying out potentially systemically risky activities has to be properly addressed and the confusion surrounding Systemically Important Financial Institution (SIFI) identification and its consequences needs to be overcome. The Geneva Association is directly involved in these discussions, supporting the work of the FSB and the IAIS-Financial Stability Committee through the provision of analytical work and the coordination of input from insurance companies. In the discussions on financial stability, the differences between insurance and banking have to be taken into account appropriately and any solutions need to be compatible with the distinct roles that insurers and banks play in today’s economic systems. The key is to ensure that regulatory imprecision or over-stretch do not hamstring a well functioning industry and damage societal interests.
“The challenges related to climate change are long and far-reaching but there will also be opportunities. Insurers have deeper and more detailed knowledge about extreme weather events and the possible consequences of shifts in climate risks than any other industry. Effective government support and implementation of risk management measures, including insurance, in both the developed and developing world are critical in protecting societies from the ravages of climate risks. While government level talks have stalled and produced disappointing outcomes in Copenhagen and more recently Cancun, the challenge of how to deal with threatening scenarios linked to climate risks remains. Few risks transcend borders as readily, put as many lives, livelihoods and values at risk, and require as close a cooperation between public and private partners. Over the coming years we are likely to see increasing evidence on climate change and as well as providing protection, the insurance industry stands ready to play a more significant role in steering risk management and adaptation measures.
“A serious demographic challenge lies ahead for most societies. The shift towards longer life expectancy and ageing populations has not only a massive and direct impact on the organisation of old-age security and health provision; it will also change the way in which societies look at risks, organise their infrastructures and generally deal with economic and other challenges. Current solutions for old-age security are often not sustainable and need wholesale reform; health systems are creaking under the weight of service provisions that are regularly outpaced by the demands placed on them, and so far, societal discussions around the proper safeguarding of long-term interests of changing and diverging populations have been limited or are non-existent in key areas. As the risk industry, insurance can make important contributions to these demanding questions and as the post-crisis environment will again free up more energies to tackle longer-term issues (rather than the financial fire-fighting of late) more of these challenges will come into focus again.”
Source : The Geneva Association Press Release