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Are There New Rules For Insurers?

The relationships between direct insurers and the community and between reinsurers and direct insurers are becoming more commercial and more arms length in nature. Old communitarian models of insurance involving the concept of risk collectives and implicit agreements to share balance sheets over time are decreasingly relevant.

The forces driving this are less concern about preservation of the entity in setting regulatory frameworks; growing consumerist and regulatory pressures for greater disclosure, product clarity and consumer protection; and extreme volatility of reinsurance pricing arising from a more disciplined definition and use of capital and growing potential for major catastrophes, both natural and technological.

Likely outcomes of this are a growing relegation of the reinsurance industry to a geographical spreading of risks role; an increasing role for government and communities at large in the spread of risk over time; a complete withdrawal of the private sector insurance industry from certain areas, such as pollution risk, where contractual wordings and normal principles of law are no longer necessarily recognised; and an increasing emphasis on risk mitigation where risk spreading is a non-viable mechanism.

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