“Ring Fencing” Threatens Emerging Markets
At the 50th Annual Meeting of the International Insurance Society in London, executives on the Global Reinsurance Leaders panel warned that emerging market nations and consumers generally will suffer if regulatory requirements lead to “ring fencing” of insurance capital locally and delinking of affiliate transactions.
Members of the panel included: Albert Benchimol, CEO and President AXIS Capital; Denis Kessler, Chairman and CEO SCOR Group; Urs Ramseier, Chairman, Twelve Capital; and Vincent Vandendael, Director, International Markets, Lloyd’s of London.
“Two (re)insurance CEO’s this morning noted that if insurance regulators move towards ring fencing insurance capital in specific jurisdictions that the net effect will be to deprive emerging markets of capital necessary to build out their insurance markets,” noted Brad Kading, President and Executive Director of the Association of Bermuda Insurers and Reinsurers [ABIR] and moderator of the IIS Global Reinsurance Leadership panel.
“All four panel members noted that if regulators mandated capital be segregated into local jurisdictions that would lead to higher consumer prices since the benefits of diversification would be lost to the (re)insurer. The outcome: reduced capacity at higher prices.”
Mr. Kading noted these public comments are a clear warning to policymakers that legislation/regulation that prevents (re)insurers from pooling their risk will have adverse consequences for the consumer.
Among the regulatory restrictions that have been under discussion in various regulatory circles are: limitations on branches, segregated capital tied to local operations, limits on affiliate reinsurance and denial of cross border access tied to unrelated tax matters.
