WHY (RE)INSURANCE IS NOT SYSTEMIC

The traditional model of (re) insurance lacks the elements that make a financial institution systemically important: risks are effectively pulverized; liabilities tend to be prefunded, which eliminates most of the leverage in the traditional sense; and active asset-liability management reduces most of the liquidity mismatch that traditionally propagates systemic risk. (Re) insurers that have stuck to this traditional business model have successfully weathered the crisis, even playing a stabilizing role. Unfortunately, this is not sufficiently recognized in the current IAIS/FSB1 debate on assessing systemic risk in the (re) insurance sector.