This year heralds a significant regulatory and commercial change for the insurance sector, according to KPMG International. In its report, ‘Evolving Insurance Regulation 2013’, KPMG says that the regulatory change agenda and the renewed need for increased growth, profitability, capital returns and cost reductions, remain central themes for all insurers.
The report examines the current consultation on financial resolution for global insurers, which it calls a crucial step for European and international convergence.
“The current consultation on systemic risk is at a crucial stage for global insurance groups as the international policy makers consider the position regarding systemic risk and the possibility of living wills for insurers,” said Jeremy Anderson, KPMG’s chairman, Global Financial Services, adding that “This may be the last chance for the insurance sector to get a position on insurance resolution which is right for the insurance sector ahead of expected international proposals.”
As a starting point, “it is imperative that a global framework is developed between insurance supervisors and this framework is likely to have many knock-on effects to existing supervisory structures.”
Cross-border cooperation and implementation of systemic risk analysis could be better facilitated by group supervision – at least at regional levels – where possible, according to KPMG. For example, there may be merit in examining the future role of the European Insurance and Occupational Pensions Authority (EIOPA) in undertaking and assuming full responsibility for group-wide supervision of European insurance groups deemed systemically important, assisted by local regulatory authorities where required.
“This could encourage a better facilitated European response among supervisors, offer a single reference point for insurance groups and provide consistency between sectors given the recent announcements regarding plans to enhance the role and coverage of bank supervision via the European Central Bank,” KPMG says. Similar Federal action could be initiated in the US.
Rob Curtis, KPMG’s Global Insurance Regulatory lead with KPMG in the UK, says, “The systemic risk issue has potentially far-reaching implications for existing regulatory structures in Europe, the US and other global markets. Policy makers should take on board suggestions to build a pan-European and US group-wide approach to supervision, which should help build international consensus in dealing with the issues of systemic risk and recovery and resolution plans for the insurance sector.
“KPMG’s submissions to the EC and IAIS urged them to consider an integrated global approach to insolvency structures and requirements. We called on the EC to continue taking part in global activities and not develop any EU-specific requirements that might constrain insurers from operating internationally. And we encouraged the IAIS to pursue the creation of a globally accepted common framework, or ComFrame.”