Fans cheer a racing event

Promoting constructive engagement of the re/insurance industry

Financial regulations are changing, observes Philippe Brahin — and hopefully in a way that favours efficient risk management.

Philippe Brahin at his office in Zurich (photo)

Philippe Brahin at his office in Zurich

Philippe Brahin: Swiss Re’s coverage of major sport and entertainment events is of course a commercial endeavour, but this work often supports the host government’s own aims. Re/insurance operates in many of the same areas that governments do: maintaining people’s financial, social, and personal security. The relations between our industry and political institutions will therefore always be complex.

This year, we are right in the middle of one of the busiest periods of financial regulation in the last half-century, with new regimes coming into force in the US and EU governing capital markets, solvency, national and regional supervision, and “systemically-important institutions” (also known as “too big to fail”).

Although the re/insurance industry has demonstrated its capacity to absorb, rather than amplify, financial shocks, it has been caught up in the rush to reform the banking sector — despite its fundamentally different business model. Tougher capital adequacy requirements, combined with a persistently low interest-rate environment, have made financial strength even more critical and prompted primary insurers to seek risk mitigation and risk transfer solutions.

We are seeing increasing convergence between emerging and mature markets in the way that our industry is regulated. There is still a higher degree of state involvement or ownership in, say, Brazil, India, or China, but the rules governing capital adequacy are certainly approaching global best practice. This will increase local insurers’ need for reinsurance solutions.

Moreover, emerging markets are increasingly moving to rebalance their economies away from an over-reliance on exports toward greater internal consumption driven by a rising middle class. The growth implications of this for re/insurance are substantial: we expect emerging market premiums to grow annually by 6%–7% over the next decade, enlarging their share of global premiums from around 16% in 2012 to approximately 24% in 2022. Here we aim to get ahead of the curve by generating 20%–25% of our premiums from high growth markets by 2015 — and in these markets, just as elsewhere, we look forward to working with peers, regulators and other relevant bodies to make sure that regulations evolve in a way that favours efficient risk management.

Philippe Brahin is Head Governmental Affairs & Sustainability and a Member of Swiss Re’s Risk Management Executive Team. He is responsible for the global monitoring of regulatory developments and the engagement of Swiss Re in sustainability risk management initiatives. He is Swiss Re’s delegate to the Institute of International Finance, the Geneva Association and the European Financial Roundtable. He is also the vice-chairman of the Economic & Finance Committee of Insurance Europe. Philippe joined Swiss Re in 2000.