From an ‘also ran’ position in the global financial order, insurance has been elevated to new heights in the international financial arena; no longer playing second fiddle to the mighty banking and derivatives industries. Following the financial crisis and the catastrophic, almost cataclysmic, failure of AIG and mono-line insurers (remember those?), international regulatory bodies such as the Financial Stability Board and the International Association of Insurance Supervisors, a sister-like body to the Basel Committee on Banking, have taken an active interest in the regulation of the insurance industry at an international level. Some might say an overactive interest. Europe’s insurers managed the crisis relatively well, but not without some help from the taxpayer or serious intervention from the regulator, as was the case in the Netherlands, Switzerland and Italy. Many financial institutions bounced back from the lows of the crisis, but at what cost? Near zero per cent interest rates and stagnant growth. What is the opportunity cost of the financial crisis? Europe’s response to the global financial crisis included the creation of a regulatory pyramid. On top of the existing base of national regulatory authorities were placed a set of pan-European regulatory authorities. These are the three ESAs: EBA for banking, ESMA for securities and EIOPA for insurance. At the top of the pyramid (somewhat next to but a little to the side of the ECB) Europe established the European Systemic Risk Board (ESRB), which it tasked with “macro-prudential oversight of the financial system within the Union in order to contribute to the prevention or mitigation of systemic risks to financial stability.” Now, for the first time, and exclusively to Solvency II Wire, the head of the ESRB’s Insurance Experts Group (IEG), Stanislav Georgiev, shares his own views about the ESRB’s work on and approach to the regulation of the European insurance industry and international regulatory efforts. “Insurance topics have been on the ESRB agenda recurrently since its very beginning,” Mr Georgiev told Solvency II Wire in a written exchange. “However, it was considered that the importance of the insurance market for the EU economy implies a more focused and thorough assessment, especially in light of the international developments in this field.” The International Association of Insurance Supervisors (IAIS) was set an ambitious timetable by the Financial Stability Board (itself directly accountable to the G20) to design and implement a global insurance standard. The entire process appears to be premised on the systemic importance of insurance. “The ESRB as an institution has not yet made up its mind on the systemic risk posed by the insurance sector and on the initiatives of the IAIS. It has recently analysed and discussed the macro-prudential aspects of Solvency II and the systemic risk of a possible ‘double hit’ – a combination of low asset price and low interest rates,” Mr Georgiev said. Based on this analysis, the ESRB was one of voices calling for an impact assessment of the LTG package by EIOPA in 2013. The ESRB analysis also helped to inform the adverse scenarios in the EIOPA stress test in 2014, Mr Georgiev explained. It was also the catalyst for creating the IEG, which he now leads. The ESRB IEG was mandated to analyse a broad range of topics. “The analysis started in a rather general manner with the role of insurance in the EU economy. We then looked into the possible contagion channels between insurance and other sectors of the economy as well as within the insurance sector.” After mapping out the exposures and contagion channels, the group began looking for possible triggers of systemic risk within the insurance sector. “Here we are investigating a plethora of different topics ranging from specific business models, like reinsurance or financial conglomerates, to the incentives and disincentives of prudential regulation.” The IEG has also been mandated to propose policies and instruments to mitigate any risks it may find.