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Member, Beacon International Group, Ltd.
SEOUL, South Korea — Designation as a globally important systemic insurer ultimately could provide a competitive advantage to insurers, as it signals that the insurer is well-capitalized, a U.S. regulator said.
Policyholders want to buy coverage from insurers that are financially stable, said Thomas Leonardi, insurance commissioner for Connecticut. In the United States, American International Group Inc., Prudential Financial Inc. and GE Capital were recently designated systemically important.
“Particularly on the life side, where people are buying a product for a 30- or 40-year promise, you want that financial stability; and if you say as a consumer this designation means the company has more supervision, that's a good thing. It has more capital. That's really good and, as it's potentially too big to fail, so the government is not going to let this company go,” he said.
Mr. Leonardi spoke Wednesday during a session of the International Insurance Society annual seminar in Seoul, South Korea.
But John Fitzpatrick, secretary of the Geneva Association in Switzerland, said being designated as systemically important will increase insurers' costs, due to enhanced supervision and a resolution process that will have to be adopted.
“Ultimately, it will just lead to higher capital requirements,” Mr. Fitzpatrick said.
To read more news from the 2013 International Insurance Society seminar being held this week in Seoul, South Korea, http://www.businessinsurance.com/article/20130613/PAGES/130619889 click here.