Kelly says industry should not have to cover cost of bail outs

The ABI has called on the International Monetary Fund to exclude insurers from its planned global levy on financial institutions to pay for a new bank bail out fund.

A report to be presented to this week’s meeting of G20 finance minister proposes a ‘financial stability contribution’ on financial institutions to cover the cost of future bail outs.

Responding to reports that the IMF is planning a new levy on all financial institutions, not just banks, ABI director general Kerrie Kelly said: “It is important that the financial system is made safe but it needs measures that are focused where the risks exist.

“Insurers were not a source of failure and their business model means they are not subject to the types of credit and liquidity risks that destroyed so many banks. Any inclusion of insurers within the scope of levies designed to impact on banks is essentially inappropriate and not justified.”

In addition to removing insurance from proposals for a bank bailout fund, the ABI called on the IMF and G20 to consider building up bail out funds over a period time so that they are not levied in such a way that damages companies emerging from the current recession.