Insurance and financial stability. Implications of the Tsunami view for regulation and supervision of insurers

Author:Shinya Kobayashi
Position:Planning and Coordination Bureau, Financial Services Agency, Chiyoda, Japan
Pages:105-112
SUMMARY

Purpose This paper aims to consider implications of the IMF Global Financial Stability Report (April 2016 edition) for the regulation and supervision of insurers. Design/methodology/approach This paper first summarises the IMF Report and then discusses possible implications, examining the underlying hypothesis on which the “Tsunami view” has been formulated. Findings This... (see full summary)

 
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Insurance and nancial stability
Implications of the Tsunami view for
regulation and supervision of insurers
Shinya Kobayashi
Planning and Coordination Bureau, Financial Services Agency,
Chiyoda, Japan
Abstract
Purpose This paper aims to consider implications of the IMF Global Financial Stability Report (April 2016
edition) for the regulation and supervision of insurers.
Design/methodology/approach This paper rst summarises the IMF Report and then discusses
possible implications, examining the underlying hypothesis on which the “Tsunami view” has been
formulated.
Findings This paper nds that the Report provides some important implications for the regulation and
supervision of insurers, although no commonalities in life insurers’ asset composition, which is the underlying
hypothesis of the Tsunami view expressed in the Report, have been observed at a global level. One of the key
implications is the importance of monitoring insurers’ exposures at granular levels in a more intensive manner
from the perspective of macro-prudential supervision.
Originality/value This is one of the rst papers that try to challenge the ndings and recommendations
of the IMF Report and, at the same time, consider what implications can be taken for enhanced regulation and
supervision of insurers.
Keywords Regulation, Supervision, Financial stability, Insurance
Paper type Viewpoint
The International Monetary Fund (IMF) (2016) (hereinafter referred to as “Report” or
“IMF Report”) in which one whole chapter The Insurance Sector – Trends and Systemic
Risk Implications was dedicated to insurance. This paper considers possible
implications of the Report for the regulation and supervision of insurers. It is not
nevertheless the objective of this paper to discuss whether and how insurers can be
systemically important[1]. This paper rst tries to summarise the IMF Report and then
discusses possible implications. Any opinions expressed in this paper are the author’s
personal ones and thus should not be regarded as the ofcial opinion of the
organisations to which the author belongs.
1. The International Monetary Fund report – ndings and policy
recommendations
The Report analyses how the insurance sector’s contribution to systemic risk has changed
over the past decade in advanced economies and concludes that the sector’s (especially life
insurers’) contribution has increased since the nancial crisis driven by growing
commonalities in insurers’ exposures and greater exposure to market risk. The Report
considers that the increase in common exposures has been partly driven by the low interest
rate environment and insurers’ duration mismatches. Although no remarkable changes in
insurers’ asset composition, especially in the direction of seeking for more risks, have been
found, the Report states that insurers have become more exposed to aggregate risk as they
The current issue and full text archive of this journal is available on Emerald Insight at:
www.emeraldinsight.com/1358-1988.htm
Insurance and
nancial
stability
105
Journalof Financial Regulation
andCompliance
Vol.25 No. 1, 2017
pp.105-112
©Emerald Publishing Limited
1358-1988
DOI 10.1108/JFRC-06-2016-0049

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