Regulators focus on risk transfer and capital arbitrage as convergence accelerates

International regulators are stepping up their oversight of the insurance industry for a multitude of reasons. The fear that life insurers are taking increasingly risky bets with long-term retail savings is high on the list. And so is the concern that the increasing convergence and risk transfer between the insurance and banking sectors may be creating unseen – and unforeseen – risks.

In recent weeks, regulatory bodies such as the UK’s newly empowered Financial Services Authority (FSA) have been visiting banks and insurance companies to gather information on cross-market transfer risk between the two sectors.