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The world's insurers are facing a new era of international regulation, a topic that will be front and centre when their leaders descend on Toronto in May.

Chief executive officers from global insurance companies that represent $15-trillion dollars (U.S.) in total assets, will meet to discuss their most pressing concerns at a summit organized by industry think tank the Geneva Association (GA). Among the issues on the table: A proposed increase in capital requirements aimed at protecting the businesses against future risk.

"It's a whole new concept to have international co-operation among insurance regulators," said Mike McGavick, chairman of the Geneva Association, which has nearly 80 member companies focused on both life and health, as well as property and casualty. "Heretofore, [monitoring] insurance was always viewed as a local, market-driven regulatory exercise."

That has changed since the financial crisis, which illustrated just how interconnected the world's financial system is. The Financial Stability Board, an international financial oversight group chaired by former Canadian central bank governor Mark Carney, designated nine insurers as globally systemically important (referred to by some observers as "too big to fail") in July last year. Then the International Association of Insurance Supervisors (IAIS), which represents regulators from around the world, expressed an intention to introduce global insurance capital standards back in October. The target implementation date for those standards is about five years away.

While the GA agrees that insurers' increasingly global ambitions can create gaps between national regulators that could introduce risk, Mr. McGavick, who is also CEO of Dublin-based insurers XL Group, said making the insurers hold more capital won't necessarily make the industry more resilient.

"The irony of the way insurance works, as opposed to the way banking works, is that it's not always clear that capital is the relevant solution," he said. "It's often not, because insurance companies get into trouble in different ways."

For example, insurance companies wouldn't experience a 'run' on deposits, Mr. McGavick said, when reserves may not be able to cover mass customer withdrawals in the same way a bank would. But they can be thrown into financial turmoil over other kinds of liabilities, as was the case with American International Group (AIG), which had to be bailed out after selling credit-default swaps on mortgage loans that went bad.

Whatever the merits of alternative forms of regulation, the train has left the station , according to Frank Swedlove, president of Canadian Life and Health Insurance Association, saying there is pressure on the IAIS to establish the standards. "We're not averse to work being done on capital standards," he said of the Canadian industry.

But Mr. Swedlove, who is also chair of the Global Federation of Insurance Associations, thinks the changes should be made slowly after much consultation and testing in the industry, especially since this would be the first global capital requirement for insurers. "The banks took 15 years to come up with the first Basel," he said, referring to the banking system's minimum-capital accord. "They had a basis to build on." He noted the first proposals for base capital requirements for systemically important insurers are expected to land later this year.

In the meantime, another storm looming on the horizon for insurers is the threat of climate change. GA is working with governments and the United Nations on supplying information about the possible global threats posed by natural catastrophes.

"Even if you can't prove the cause, you have to work to reduce negative impact," Mr. McGavick said. "We try to stay away from the political holy wars, and stick to the facts: That in an environment when there's an uptick [in disasters] like this, you do have to look at your own actions…"

Regulators will be present at the upcoming event in Toronto, which will be co-hosted by some of the country's largest insurers, such as Manulife Financial Corp., but it's not meant to be a lobbying event. "What we're really interested in is a high-level view of what regulators are trying to achieve, and how we can help them understand the impact of these decisions," Mr. McGavick said.

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