By In its responseto a European Commission consultation on a possible framework for the recovery and resolution of non-bank financial institutions, Insurance Europe has highlighted once again why the unique business model of insurers reduces the potential for systemic risk in insurance. It also stresses the need to first identify any potential sources of systemic risk in insurance before working on ways to address them.
While certain non-insurance activities carried out by insurers (such as credit default swaps and securities lending) can potentially contribute to systemic risk, Insurance Europe argues that such risk can be most effectively managed by enhanced risk management and appropriate supervision rather than specific resolution regimes. It believes that no new recovery and resolution mechanisms are required in insurance beyond those currently in place in Europe and those proposed in the upcoming Solvency II regulatory regime.
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