Insurance industry lobbyists say that if policymakers are to impose a tax to fund future financial industry bailouts, it should not apply to their sector.

In a statement to G20 leaders ahead of the summit in Toronto, the Canadian Life and Health Insurance Association and 21 other insurance industry associations point out that insurers emerged from the financial crisis relatively unscathed.

“This is due to the insurance sector’s distinct business model as compared to banking and the already sound approach to regulation,” it says, adding that G20 leaders should keep this in mind as they consider imposing a tax to cover the cost of government support.

“Although some non–traditional activities may have contributed to systemic risk, the core activities of insurers do not generate systemic risk, nor do traditional insurance products create the kind of risks that led to the financial crisis,” it says.

Individual insurers did have their role to play in the crisis, particularly to the extent they participated in the derivatives market. However, overall, they were largely bystanders, according to a report from the OECD.

“Consequently, any measures requiring insurers to pay for the cost of failures in other sectors would, in our view, be inappropriate and harmful to our policyholders,” the lobbyists say in their letter.

“In light of the fact that the profile of the industry does not present a systemic risk and that there was no widespread recourse for government intervention on the part of insurers, we feel strongly that insurance should be exempted from any levy, as suggested in the IMF’s draft advice to the G20, to pay for the fiscal cost of government support to the financial services industry. If this levy were ever introduced, it should apply only to those sectors that receive the support,” it argues.

Additionally, it calls on the G20 to ensure that any new insurance industry regulation is coordinated at the international level. “With regard to international standards, the insurance industry is generally supportive of having strong prudential regulatory standards that are consistent with a risk- and principles-based approach,” it says, adding, “We would urge regulators at the national and international level to be mindful of the effect excessive capital requirements might have on insurers, as well as on their ability to meet the needs of policyholders.”

The industry also says that any new regulations should, “to the greatest extent possible, be streamlined and pro-competitive across all major jurisdictions.”

IE