LONDON Dec 11 Insurers are smaller than banks
and less intertwined with the global economy, according to a
study aimed at convincing regulators to exempt the sector from
tough new capital requirements being imposed on the banking
The world's 28 biggest banks on average hold $1.5 trillion
of assets, nearly four times as much as the average of the 28
top insurers, according to the study, published on Tuesday by
the Geneva Association, an insurer-funded think tank.
The biggest banks have also sold 158 times as much
protection through credit default swaps, securities that shield
investors from non-payment of debt, magnifying the potential
consequences if they go bust, the Association said.
The study forms part of an insurance industry effort to
deflect capital penalties that global regulators plan to impose
on big banks to limit the impact of them going bust and prevent
a repeat of the 2008 crisis.
Regulators from the G20 group of countries have accepted
that traditional insurance poses no threat to the financial
system, but could still force insurers involved in risky
activities beyond their core business, such as derivatives
investment, to hold extra capital.
Although insurers emerged from the 2008 meltdown in better
shape than banks, AIG of the United States and Swiss Re
both had to seek emergency finance after absorbing
heavy losses from credit default swaps they had sold. Some
insurers in the Netherlands also required bailouts.
Insurers argue they are fundamentally less risky than banks
because they do not lend and their customers cannot withdraw
their cash overnight. Imposing excessive constraints on the
sector could reduce the amount of insurance available, holding
back global growth, the Geneva Association said in its study.
The International Association of Insurance Supervisors
(IAIS) is expected early next year to publish a list of insurers
that it considers big enough to pose a potential threat to the
The Geneva Association study, based on data from insurers
including Axa, MetLife, Berkshire Hathaway
, and Tokio Marine, also concluded that banks
have 11 times as many liabilities to other financial
institutions as insurers.
The 2008 crisis, triggered by a drying-up of interbank
lending amid worries over the sector's exposure to distressed
mortgage-backed assets, was exacerbated by close links between
financial institutions which prompted a domino effect of