But IAIS chief says mainstream insurance activities are of ‘very little concern’

Insurance companies can contribute to systemic economic risk by dabbling in non-traditional activities, according to the chairman of the International Association of Insurance Supervisors.

But Peter Braumuller, in his opening remarks to an IAIS conference on insurance and financial stability said mainstream insurance activities are of “very little or no systemic concern”.

He said: “Stable premium flows and non-dependency on short-term financing, or fairly predictable cash-outflows over a comparatively long time horizon, that make traditional insurance activities non systemic.

“When we look at non-insurance activities, the shoe is on the other foot. The recent financial crisis underscored that even financially strong insurance groups and conglomerates may suffer significant distress and become globally systemically important when they expand significantly into non-insurance activities.”

Examples of such non-insurance activities included, he said, credit default swaps non-hedging purposes and leveraging assets to enhance investment returns.