Speech (Video) for 2013 5th International Insurance Conference
1. What impact do you expect emerging regulation, such as Solvency II, to have on insurers’ investment strategies?
After the 2008 global financial crisis, international insurance standards become critical for all regulators to follow up. The FSC has set a working group to research international standards in order to improve our regulation, such as RBC, corporate governance and ERM system.
The solvency regime is to ensure that insurers’ individual solvency positions reflect the specific nature of their risk profile. Hence, insurer will be more and more risk-sensitive in their investment strategies to measure and manage the risks. Meanwhile, the IAIS is drawing the ComFrame standards for Insurance Groups. These substantial regulations will affect insurers on some important aspects, especially on corporate culture, capital allocation, business models and investment strategies. Insurers may adjust their investment strategies by applying modern risk management, which includes asset and liability management.
2. Do you see significant differences in investment approaches and potential outcomes around the world?
There will be more and more conversation between regulators and insurers. Risk management and corporate governance become big issues in order to adjust the behavior of chasing high-risk and complex products for high profits. Some insurers may take these emerging regulations as big challenge and argue these will increase their compliance cost. However, Solvency II and other international standards are intended to be better harmonized across the world, and provide consistent requirement for insurers in order to improve their financial strengths, which I believe that it will benefit the whole financial industry and increase protection for policyholders ultimately.
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