The financial services industry has faced much criticism and fallout from the global financial crisis. Subsequent debate and developments have focused on the causes of the crisis and how to avoid a recurrence in the future.
Since 2009, the Financial Stability Board (FSB) has been reviewing the financial strength of systemically important financial institutions (SIFIs), initially focusing on banks. In July, the lens widened to insurers when the FSB announced that some insurers may be categorized as SIFIs and, as a result, subject to capital surcharges are required to prepare credible recovery and resolution plans (RRPs), this is already moving ahead in the U.S. under Dodd-Frank.
Significant debate and resistance within the insurance sector has arisen following this major development – with many in the sector arguing that insurance companies do not pose a systemic risk due to substantial differences between banking and insurance models. This is just one consideration which has sparked debate and activity in the industry while policy solutions, particularly around recovery and resolution planning, have not been contemplated.