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David Snyder

vice president, international policy

The Property Casualty Insurers Association of America

PCI appreciates that the FSB implicitly recognized that the vast majority of insurance companies are not systemically important by designating as G-SIIs only a very small number of insurance companies. PCI also commends the IAIS for taking a clear and final position that the traditional insurance business model does not pose systemic risk.

International insurance regulators through the IAIS have concluded again that neither the short nor long-term experience of insurance markets, including during the global financial crisis, provides any evidence that traditional insurance generates or transmits systemic risk in the financial system or the real economy. The potential for systemic risk arise only from non-traditional or non-insurance activities. And IAIS stated that traditional property and casualty activities do not give rise to systemic risk.

Before the policy measures are imposed on the few designated G-SIIs, we urge a careful re-evaluation of the systemic risk issue in the context of U.S. developments to ensure that the benefits of any additional regulation far exceed their costs and that good companies are not harmed.” said Snyder. He added “In this connection, we strongly support the interest among members of Congress for representatives of the U.S. engaged in international regulatory issues to coordinate closely and adhere to principles that benefit, not harm, healthy, competitive U.S. insurance companies, our regulatory system and insurance markets both here and abroad.

Leigh Ann Pusey

president and CEO

American Insurance Association

AIA has repeatedly stated its view that the insurance business model and the regulated insurance activities that flow from that model do not pose a systemic threat. To the contrary, the insurance business model possesses features that add stability to the financial markets. Property-casualty insurer operations are funded by upfront premiums, which reduces the need to access the credit markets. Because the risks that a property-casualty insurer assumes are typically not correlated, an insurer is not prone to a customer 'run' on the company's assets and consequently, can better control its outflows. This low leverage environment of property-casualty insurers is a key element of stability.

While the IAIS acknowledges the low potential for systemic risk from regulated insurance activities, we remain concerned with the designations and the methodology that produced the designations for a few reasons. First, since the global methodology was directed solely at insurers, the criteria compared insurers to one another, rather than all other types of financial institutions. As a result, we are not confident that the process yielded results based on objective 'systemic risk' criteria. This has also led to artificial distinctions in the methodology between 'traditional' and 'nontraditional' types of insurance activities that may not be based on systemic risk and may unfairly stigmatize those types of insurance that are deemed nontraditional. Second, AIA remains concerned that such a 'ranking' of insurers overemphasizes size, despite the IAIS methodology limiting size to 5% of the designation determination. Third, for those designated as G-SIIs, the IAIS plans to now develop backstop group capital requirements that will be applied on a global basis. If companies are incorrectly designated as G-SIIs, application of heightened capital standards could end up either harming their ability to compete or could unintentionally lead to the type of systemic threat that the FSB and IAIS are trying to avoid.

The reliance on additional capital as a regulatory first step – rather than a measure of last resort - should be subject to thoughtful and serious debate about (1) the role of capital in the insurance business, (2) respect for local jurisdictional standards, and (3) the preservation of private market competition across the globe. As the IAIS goes on to develop a 'quantitative capital standard' as directed by the FSB, AIA will continue to work with the IAIS and national and international regulatory regimes to resolve this critical debate in a way that protects insurance consumers, leads to efficient and effective supervision, and advances competition.

John H. Fitzpatrick

secreatry general

The Geneva Association

The Geneva Association recognizes the importance of creating a more stable financial system and supports the G20-led efforts to address systemic risk. Based on research undertaken since 2009, The Geneva Association has advocated that an activities-based approach and a clear focus on systemically risky activities be at the heart of the process. The IAIS has reconfirmed the importance of an activities-based approach in its recommended consequences and measures.

Fitzpatrick: “The Association's research suggests that strong lead supervision of an insurance group can be more effective than higher loss absorbency (HLA) in addressing systemic risk. That said, any 'backstop capital requirement' needs to be tailored specifically for the insurance business model and care taken to avoid creating new competitive issues.”

Thomas B. Leonardi

Connecticut Insurance Commissioner

Represents state regulators in the Financial Stability Committee at the IAIS on behalf of the FSB

The National Association of Insurance Commissioners

The National Association of Insurance Commissioners recognizes the important work being conducted by the Financial Stability Board to address systemic threats to the global financial system. Nevertheless, we are concerned that FSB's identification of globally systemically important insurers today is premature to the extent it relies solely on the work of the International Association of Insurance Supervisors.

The IAIS agreed on a quantitative methodology which produces a relative ranking of firms based on metrics thought to be relevant for determining systemic importance. However, in our view, the analysis conducted to date by the IAIS is not sufficient by itself to draw the conclusion that any or all of the firms on the list are GSIIs.

Further, we continue to believe that traditional insurance activities are not systemically risky. Therefore, we urged that a comprehensive comparison of GSIIs with proposed systemically important banks be conducted to assess the threat posed by potential GSIIs relative to financial firms in other sectors. In other words, understanding whether the most systemically risky insurer (by virtue of its nontraditional or noninsurance activities) is still less risky than the least systemically risky bank, is relevant before making a designation and recommending additional requirements that will bifurcate the market.

Despite having the largest number of GSIIs within our jurisdictions, U.S. state insurance regulators have little insight into the deliberations at the FSB, so it is unclear whether other information beyond the IAIS work was considered. Mitigating systemic risk is an objective all financial regulators share, but given the impact of this effort on financial firms and their customers and the potential for an unlevel playing field in otherwise competitive and healthy insurance markets, it is important to get this right.

Dieter Wemmer

CFO

Allianz SE

Even though we continue to be of the opinion that the insurance business in general and Allianz in particular does not represent a systemic risk, we acknowledge the decision of the FSB and will continue to support its efforts for more stable financial markets.

Allianz enjoys a widely diversified, resilient business model, a very solid capital base and sustainable profitability. Therefore, we are well positioned to manage the new requirements this designation will lead to regardless of the specific form they take.

Assicurazioni Generali acknowledges that it has been designated by the Financial Stability Board as a Systemically Important Financial Institution due to the size of its non-insurance activities. Any potential impact of this designation on Generali is yet to be determined and will apply in 2019.