Lord Levene insists insurers do not contribute to systemic risk
European insurers mounted a wide-ranging campaign this week to squash plans to include the industry in a planned global financial services levy. The International Monetary Fund presented its proposal for a so-called “financial stability contribution” (FSC) at last weekend’s meeting of the G20 finance ministers.
Under the IMF’s proposal, the FSC would work on a sliding scale. All financial institutions would be obliged to pay the levy, with the level determined by how much they contribute to systemic risks in the wider economy.
The paper adds that, as a value-added tax, the levy would compensate governments for financial institutions’ general exemption from VAT.
The CEA, the umbrella body for European insurers, has written to all EU finance ministers warning that “a risk that inappropriate measures will be applied could prevent the insurance industry from effectively performing its stabilising role in the financial system and the economy.”
It argues that the sector does not pose a systemic risk, saying that of the estimated $10 trillion (£6.52 trillion) of post-crash support for the financial services sector, just $10bn went to insurance companies.
The CEA’s concerns were echoed by international industry think-tank, the Geneva Association, in a letter to G20 finance ministers. It says the IMF’s proposal “fails to adequately address the distinct nature of the insurance industry”.
Lloyd’s chairman Lord Peter Levene described the proposal as “deeply flawed”, saying: “Throughout this crisis, the insurance industry has functioned normally and there is absolutely no evidence to suggest that core insurance activities have contributed to financial instability or create systemic risk.”