Regulatory risks represent the potential impact of changes in the regulatory and supervisory regimes of the countries in which we operate. In 2014, the global regulatory agenda continued to accelerate. Governments and regulators rolled out new policies and conducted numerous consultations and field tests on regulations with a direct impact on the re/insurance sector. Many reform proposals reflect the financial supervision agenda set by the G20, which includes a focus on internationally active re/insurance groups and global systemically important re/insurers.
Swiss Re remained engaged in the regulatory debate throughout 2014, supporting regulatory convergence as well as increased application of economic and risk-based principles. At the same time, we strive to mitigate developments that may adversely affect the re/insurance industry’s ability to foster financial and economic stability.
For example, we share the broad concerns of the re/insurance industry regarding the cumulative and cross-sectoral impacts of some of the proposed reforms. Regulatory fragmentation is a key issue, particularly in the context of protectionist measures introduced in some growth markets. Moreover, the introduction of Solvency II in Europe has not fully achieved the goal of regulatory harmonisation.
We also share concerns that the design and implementation of regulatory reforms may increase procyclicality, which could exacerbate the effects of short-term market volatility. In 2014, we participated in consultations with the Financial Stability Board (FSB), the International Association of Insurance Supervisors (IAIS), the Organisation for Economic Co-operation (OECD), the European Insurance and Occupational Pensions Authority (EIOPA) and the European Commission on the implications of regulatory reforms, in particular on long-term investments, for example in infrastructure.
In view of the strategic importance climate change has for our core business, we closely monitor regulatory developments in this area. Awareness of the topic by governments and regulators has continued to build, leading to an increase in climate-related reporting requirements. In 2014, the regulators of eight US states mandated that insurers domiciled or licensed in those states with USD 100 million or more in direct written premiums must complete a survey on climate change risks. Meanwhile, the UK government has recently introduced new regulations that have required quoted companies to disclose their greenhouse gas emissions in their annual reports from the fourth quarter of 2013.