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Group of 20 Financial Stability Board Names Nine Insurers Systemically Important

Source: Dow Jones - Leslie Scism

Posted on 19 Jul 2013 by Neilson

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InsurersNine insurers from around the globe have been deemed as posing risk to the global financial system by a panel of the Group of 20 leading economies.

In the U.S., American International Group Inc., MetLife Inc. and Prudential Financial Inc.  made the long-awaited list of the Financial Stability Board, which is coordinating global efforts to reduce the risk of financial calamity.

In addition to those three, the list of so-called Global Systemically Important Insurers includes five European insurers and one Chinese company. Those are Allianz SE, Assicurazioni Generali SpA, Aviva PLC, Axa S.A, Ping An Insurance (Group) Company of China, Ltd. and Prudential PLC.

All are subject to higher capital requirements and other to-be-determined conditions. For the U.S. ones, specific requirements haven't yet been spelled out.

"A sound capital and supervisory framework for the insurance sector is essential for supporting financial stability," said Mark Carney, chairman of the FSB, in a statement.

Earlier this year, AIG was named systemically important by a federal panel in the U.S., in a move the insurer--the recipient of one of the biggest government bailout packages during the 2008 financial crisis--didn't challenge.

Prudential Financial was proposed for the label by the same U.S. panel, the Financial Stability Oversight Council, but the Newark, N.J.-based insurer is challenging the designation.

MetLife on Tuesday was moved into an earlier stage of the council's review process.

"AIG looks forward to working with our international, federal and state regulators to develop a regulatory framework for large global insurers that is both robust and consistent," an AIG spokesman said Thursday.

In a statement, Prudential Financial said its "expectation is that the FSB will rely on regulators in the United States to implement G-SII policy measures for U.S.-headquartered companies. Prudential will remain engaged at both the global and domestic level on developing regulatory standards that are beneficial to consumers and preserve competition within the insurance industry."

MetLife confirmed that it had been notified of its Group of 20 designation. "We are reviewing the proposed policy measures for G-SIIs," a spokesman said.

The International Association of Insurance Supervisors, which worked with the Group of 20 panel on a methodology for assessing insurers and has proposed policy measures for them, noted in materials on its website Thursday that potential for systemic risk increases "where insurers significantly deviate from the traditional insurance business model and particularly where they engage in non-traditional insurance or non-insurance" activities.

The supervisor group also noted that "for most lines of business there is little evidence of traditional insurance either generating or amplifying systemic risk within the financial system or in the real economy."

The Basel, Switzerland-based Financial Stability Board was established to coordinate the work of national financial authorities and international standard-setting bodies, according to its website. It brings together national authorities responsible for financial stability in 24 countries and consults with many other dozens of other jurisdictions through regional groups.