Insurers could be caught up in a fresh regulatory backlash triggered by banking scandals such as the Libor rate-rigging affair, the head of the Lloyd's of London insurance market said."We are always having to deal with the fallout of the actions of others and the regulators responding accordingly," Lloyd's chief executive Richard Ward said.
"You have the Libor scandal, all the stuff with Standard in the United States - that doesn't help restore the image of financial services in the eyes of the public, the politicians and regulators."
British bank Barclays was fined $450 million earlier this year for rigging the London Interbank Offered Rate, a key lending rate used to set prices for a wide range financial transactions. Rival Standard Chartered agreed last month to pay $340 million to settle allegations by a New York regulator that it carried out banned transactions with Iran.
The latest allegations of misconduct by British banks, which also include the potential mis-selling of complex derivative hedges to small business borrowers, could prompt regulators to police insurers and banks alike more aggressively, Ward said.
"There's always going to be increased regulatory scrutiny when there are people doing things which are wrong," he said on the sidelines of the reinsurance industry's meeting in Monte Carlo. "The 2008 financial crisis was not an insurance crisis, it was a banking crisis. All the regulatory changes we've experienced in the UK have been driven by the banking crisis." Insurers have for the last four years been lobbying for an exemption from proposed new regulations aimed at preventing a repeat of the 2008 crisis.
Under rules being drafted by regulators from the G20 group of countries, insurers or banks deemed big enough to destabilise the financial system if they collapsed could be forced to hold an additional capital buffer.
Insurers say they do not pose a 'systemic' threat, unlike banks, because they do not lend money and their customers cannot withdraw their cash overnight, and argue regulators should treat them more leniently.
"Any business that just undertakes insurance should not get onto any list of systemically important financial institutions," Ward said.