| Headline: Regulators focus on risk transfer and capital arbitrage as convergence accelerates Source: Euromoney Date: January 2002 Author: Nick Evans International regulators are stepping up their oversight of the insurance industry for a multitude of reasons. The fear that life insurers are taking increasingly risky bets with long-term retail savings is high on the list. And so is the concern that the increasing convergence and risk transfer between the insurance and banking sectors may be creating unseen – and unforeseen – risks. In recent weeks, regulatory bodies such as the UK’s newly empowered Financial Services Authority (FSA) have been visiting banks and insurance companies to gather information on cross-market transfer risk between the two sectors. Andrew Crockett, general manager of the Basle-based Bank for International Settlements, identified transfer risk as one of the potential vulnerabilities in the financial system in a recent article on future financial risks. “The pace of development in financial markets during the past five years means that many new financial structures have yet to be tested in a downturn,” wrote Crockett. “For example, a whole range of financial risk insurance and transfer products has developed to spread risk more widely. |