At a speech to the annual seminar of the International Insurance Society (IIS), Julie Dickson thwarted insurers that demanded regulation to recognize their distinctiveness. On the contrary, the Superintendent of Financial Institutions endorsed the convergence of the bank and insurance sectors.The IIS seminar illustrated that life and health and P&C insurers worldwide all fear being disadvantaged by regulation better suited to banks than insurers.
Ms. Dickson also dashed the hopes of advocates of special treatment for insurers compared with banks in the new regulation. The Superintendent pointed that the lessons of the crisis apply to insurers and banks alike.
She noted a lag on the global scale in development and adoption of oversight and regulation standards. After her speech, Ms. Dickson was barraged by questions from the audience. Some complained that the global monitor of regulatory bodies – the Financial Stability Board (FSB) – seemed indifferent to insurers’ reality. IIS Head of Institutional Relations, Brian Atchinson feels that the FSB is inaccessible. He is worried that this body is concerned less with insurers’ business environment than with that of the banks.
Ms. Dickson’s reply unequivocally confirmed FSB’s intention to tighten the screws for both insurers and banks. “FSB doesn’t have the same level of experience with insurers than with banks. They don’t want to give the impression that nothing applies to the insurers,” she said.
As for the accusation of inaccessibility, Ms. Dickson pointed out that the FSB’s priority was the bank sector, for now. The organization monitors several regulatory bodies in the bank, insurance and accounting sectors. The Office of the Superintendent of Financial Institutions is an FSB member, as are several banks. Ms. Dickson says she is willing to distinguish the two sectors as much as possible.
Some seminar attendees mentioned that in the wake of the crisis, insurers find themselves with less capital for the same risk level. Ms. Dickson countered that Canada must be proactive in this respect, hence the intensification of capital rules observed since the start of the year and the introduction of crisis simulation tests by the Superintendent. She also stressed the importance of harmonizing capital rules for insurers around the world.
Is this regulatory brouhaha making the industry more solid? “We’ll know after it’s [new insurance regulation] done if it is solving the problems. I don’t see unintended consequences so far,” Ms. Dickson says. She adds that the rules are useless without oversight. “There’s a need for much more robust and aligned supervisory practices globally.”