To ensure a more sustainable and stable insurance sector, the Dutch Association of Insurers has formulated the following recommendations:
- A stronger focus on the risks connected with periods of strong growth. Management and supervisor should actively search for business segments which grow fast and show (very) high yields. In addition, more financial reserves should be built up to deal with periods of contraction.
- A more active role for supervisors. If necessary, intervention where a strong increase of risks is observed, but as much as possible in a coordinated international context.
- Risk management should be safeguarded at the company’s top level. To this effect, risk models should become more transparent and, if possible, simpler.
- Solid independent capitalization of subsidiary companies. This will increase the financial stability of the insurance sector as a whole.
The recommendations are included in a press release of the Association of Insurers in connection with the publication of a position paper on the credit crisis. They follow a report prepared by the Boston Consulting Group at the request of the Insurance sector. In addition, the principal conclusions of the Association are:
- The European supervisory framework Solvency II should be applied in an expedited manner.
- The IFRS bookkeeping rules should be modernized taking into account undesirable pro-cyclical effects of this system.
- Rating agencies should become subject to independent supervision.
- In contact with customers, even more attention should be given to the relationship between risk and yield.
- Although the remuneration system has played a minor role in the credit crisis, the Insurance sector will in a dialogue with the Dutch Central Bank review the structure of the remuneration policy.
(press release of the Dutch Association of Insurers dated 5 February 2009)