President of the Association of Bermuda Insurers and Reinsurers (ABIR), Brad Kading, has cited international insurance regulatory standards and various protectionist measures as posing a risk to global business.
The remarks came during a “Regulation as a Business Risk” conference at St. John’s University in New York.
“New reinsurance capital affords policymakers with a great opportunity to prevent deficits in government insurance programs that will saddle taxpayers with extra costs. Unfortunately, badly designed international group capital standards or increased protectionist measures could destroy this opportunity and burden taxpayers with financing unnecessary government insurance programmes,” said Kading.
“We are at a crossroads. Capital markets are enormously interested in providing reinsurance capital. However, some governments around the world have proposed protectionist regulatory measures that dictate limits on reinsurance operations, restrict cross border trade or mandate cessions to state controlled enterprise—each of which may drive capital out of the business.”
He continued: “Policymakers can resist the protectionist path and make markets more competitive, or take the path of “ring fencing” local markets by limiting trade and dictating locally held capital. The latter will make insurance products more expensive and markets less competitive.”
Next week in Amsterdam, the International Association of Insurance Supervisors (IAIS) will hold public hearings on international capital standards, marking the next stage of consultation in development of global, group capital requirements.
“ABIR supports the development of international capital standards, but is concerned that the rapid speed of deployment and inadequate field testing will lead to insufficient, risk-sensitive, counterproductive capital requirements that will create excessive capital burdens rather than recognise the diversification benefits of intra group reinsurance support for global operations,” added Kading.
He also noted that the leadership of the Bermuda Monetary Authority (BMA) is building out leading-edge group supervision and group capital regulatory requirements which recognise the need for group capital management while meeting international standards. Additionally, the ABIR president acknowledged and supported the work being done within the European Union and the US with regard to mutual recognition amongst qualified insurance supervisors.
Brad Kading, ABIR, regulation, business risk, reinsurance, capital markets, BMA