Insurance firms and banks 'can't be treated same'
Zurich warns regulator of risk to insurers
One of Ireland's biggest insurers has warned financial regulator Matthew Elderfield that he must not treat banks and insurance firms in the same way following the damage done during the financial crisis.
Zurich, which has general and life assurance operations in Ireland, said it was worried that Mr Elderfield's reforms could result in insurance firms such as Zurich being seen as posing a "systemic risk'' to the Irish economy and further afield.
In a submission, Zurich, one of the bidders for Quinn Insurance, said there was a danger Mr Elderfield could end up viewing banks and insurance companies in the same way.
"We are very strongly of the view that mixing prudential impact and systemic impact is not a good approach,'' said the company's Irish unit.
The firm was responding to a new review of how financial services firms are regulated being conducted by Mr Elderfield. The regulator, who took over from Patrick Neary in January 2010, is zoning in on how so-called "high-impact firms'' are regulated. These are firms that have the potential to cause ripples across the economy if they get into trouble.
"We are concerned that classification of a firm as 'high impact' may create a perception -- both with national and international regulators and the market in general -- of this firm as posing a systemic risk," said Zurich.
"Such a perception could have far-reaching and unintended consequences for the firms concerned."
Zurich said that while Mr Elderfield was moving ahead with his own work, other international regulators were not yet finished considering the whole area.
"The assessment of systemic risk posed by individual financial institutions is a highly complex task and work in this area by international policymakers is still ongoing,'' it pointed out.
Zurich said it was time for Mr Elderfield to adopt a different approach to banks and insurance companies.
"We have suggested that the Central Bank consultation papers ought to more explicitly differentiate between banks and insurers to the point that, where necessary, separate consultation papers and separate resultant policy papers, codes and rules are published in respect of insurers.
"This distinction ought not to be disregarded in the mistaken belief that there are no major differences or on the basis of administrative convenience.
"We are very strongly of the view that adequate recognition must be afforded to the different operations and types of business by banks as against that of insurers,'' the firm added.
"The importance of making such a distinction is ever more pressing in the context of the assessment of risk.''