Global insurance industry may be in for change as regulators come together to draft new rules

International InsuranceIn the wake of major natural disasters and allegations of corruption, the world’s insurance industry is set for change. Insurance regulators from several nations have begun drafting new rules to present to political leaders in time for the 2012 G20 summit .These new rules are being tailored to ensure that the actions that spurred the 2008 economic recession cannot be repeated in the future. Both the International Association of Insurance Supervisors (IAIS) and the Financial Stability Board (FSB) are playing a major role in drafting the new rules. Overall, the rules will institute more supervision over the world’s insurance industry while levying capital surcharges on insurers.

Much of the effort to reform the insurance industry lies in determining which companies are important to the overarching financial institutions of the global economy. Insurers that are found as being not vital to the global system will be faced with capital surcharges. These surcharges are an attempt to insure the worldwide economy from another financial disaster reminiscent to that of 2008.

Big insurance companies pose a significant risk to the global economy. Much of this risk lies with insurers diverging from traditional business models and branching out into more ambitious investments.

Yoshihiro Kawai, secretary general of the IAIS, spoke with Reuters regarding the issue, saying that the exact approach to reforming the insurance industry is still vague, but regulators are convinced that major changes need to be made for the sake of the world’s financial system.

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