FRANKFURT, July 10 The insurance industry needs worldwide definitions for the capital underpinning its business just as the Basel III capital rules have set standards for the banking sector, the chief executive of Zurich Insurance told a German daily.
"We cannot tolerate regulatory fragmentation in the long term," Martin Senn told Handelsblatt in an interview to be published on Thursday. The paper released an excerpt on Wednesday.
"The industry needs a worldwide standard," he added.
Europe is trying to roll out risk-capital rules for its insurance industry, known as Solvency II, which aim to replace a patchwork of local regulations.
But the process had run into snags and is seen by many foreign policy makers as being too complex to be adopted as a standard in their own countries.
Senn said a move to require global systemically relevant insurers - insurers so important that their collapse could threaten the financial system - to hold more capital as a safety buffer could lead to worldwide capital standards.
The Financial Stability Board, a group of global regulators set up by the Group of 20 advanced and major developing economies, plans to unveil its list of globally systemic insurers this month.
"All systemically relevant insurers, whatever their country of origin, should hold an extra capital buffer," Senn said.
"For me, this additional reserve could be the starting point of a world standard for insurers," he told the paper.
Up until now insurers have argued that, unlike banks, insurance business alone poses no threat to the financial system and they should not be penalised with extra capital charges. (Reporting by Jonathan Gould; Editing by Marilyn Gerlach and Louise Heavens)