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    Banks vs. Insurers: Systemic Risk Comparison; A Study Prepared by The Geneva Association

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    During the Geneva Association’s Insurance and Finance Conference held on December 11, 2012, the Association presented the results of its benchmarking study comparing 28 global systemically important banks to 28 of the largest global insurers, applying the criteria established by the international Financial Stability Board (FSB) for designation of global systemically important insurers (G-SIIs).  The report was issued in anticipation of the FSB’s designation of G-SIIs, which is expected in early 2013.  Despite long-standing concerns over uniform application of criteria across the banking and insurance industries – in particular, the notion that insurers carry less systemic risk – this is the first study of its kind.  The study analyzes 17 indicators that are comparable among insurers and banks.  Highlights from this study are listed below:

    • Insurers are significantly smaller than banks in most of the 17 indicators.
    • Insurers match assets with liabilities and are thus less exposed than banks to the systemic risk of maturity transformation (borrowing short to lend long) and carry substantially lower positions in derivatives.
    • Significantly smaller amounts of short-term funding show that insurers are much less interconnected with the financial system than banks.

    For a list of the banks and insurers used for this study, and to see more details regarding the analyses and results, click here for a copy of the report.

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