Banks may have been at the forefront of the financial crisis, but insurers should pay attention to the regulatory reforms that are in the works as many of the same issues may impact them, says Superintendent of Financial Institutions Julie Dickson.

Dickson, the head of OSFI, addressed how the financial crisis may affect life the regulation of insurance companies at a forum in Cambridge, Ont. on Thursday.

“I think the lessons of the financial turmoil apply equally to all financial institutions. And I believe that insurers should be watching what is being talked about in the banking industry, and bankers should be watching what is being discussed in the insurance industry,” she said.

“Globally we need to move to a regime where there is more similarity between prudential regulation of banks and life companies,” Dickson said, adding, “While most discussions around future regulatory changes are currently bank centric, this will evolve as many of the prudential regulators around the table are integrated regulators.”

She noted that certain lessons from the crisis apply equally to other sorts of financial institutions, not just banks. For example, in the area of compensation and governance, she observed that, “During the turmoil, it became evident that numerous weaknesses in governance stemmed from what several firms admitted was a disparity between the risks that the firms took, and the risks that their boards perceived the firm to be taking. One particular weakness globally has received a lot of attention: the role of boards in setting compensation and then subsequently monitoring the incentives it created… It is hard to imagine that only banks were susceptible to these forces.”

As a result, she notes that as OSFI assesses compensation practices at the big six Canadian banks and the three big insurers, it will be using the same methodology for both.

Dickson advised those in the life insurance industry to pay attention to deliberations concerning bank regulation, “because the subjects which are being discussed provide information on where regulation might be moving not only for banks but for insurers.”