Howard Davies, chairman of the Financial Services Authority, has called for international regulation of the insurance industry to counter the strains that bancassurance deals are placing on domestic regulatory frameworks.
Addressing the International Insurance Society's 36th annual seminar, he said: “Increasingly, the structures of individual deals and mergers are pushing against the boundaries of existing legal and regulatory frameworks.”
He expected this trend not only to continue in the future, but to have impact throughout the industry, putting regulation under increasing pressure.
“In the medium- to long-term, I would hazard a guess that regulatory structures will need to adapt to market forces,” he said.
“There continues to be significant cultural differences between banking and insurance – differences that need to be carefully handled.”
Davies points to the lack of an agreed capital adequacy or solvency level, as well as to an inconsistent approach to the supervision of reinsurance and reinsurers.
“There is an increasing international focus, at the political level, on these gaps in global insurance regulation, and on the potential vulnerabilities in the sectors that lie behind them, he said.”
Davies said major financial centres and the G7's leading regulators were now turning their attention to the issue and had started to call for change.
“They are making it very clear that they want to see more rapid progress in key elements in the agenda of the International Association of Insurance Supervisors,” he said.