There was much coverage last month on the fifth anniversary of the collapse of Lehman Brothers, but it was also the fifth anniversary of the U.S. government’s intervention in AIG. While the issues at Lehman Brothers and in the wider banking system are well understood, the same cannot be said of the mechanisms that led to the AIG situation.

Executive Summary

The regulatory spotlight is now focused on tackling systemic risk in insurance, including measures to stop a recurrence of the AIG crisis. But these measures are not taking proper account of the special nature of insurance, writes The Geneva Association's John Fitzpatrick, who notes the drivers behind the regulation of the insurance industry are more political than they are based on logic and fact.

This is important because having tackled perceived issues in the banking business, the regulatory spotlight is now focused on tackling systemic risk in insurance, including measures to stop a recurrence of the AIG crisis. But these measures are not taking proper account of the special nature of insurance. Understandably, a considerable and vocal chorus of objection has erupted from the insurance industry.

In an article he wrote last month (for Reactions CEO Risk Forum 2013), Mike McGavick, chairman of The Geneva Association and XL Group CEO, raised concerns about the danger that multilayered, overlapping regulation of the insurance industry will create more problems than it solves.

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