Long-term effects of financial crisis on insurance industry remain unclear: IAIS

Despite existing signs suggesting the worst of the financial crisis may be over for global property and casualty insurers, the full effects of the crisis are not entirely clear, says a report by the International Association of Insurance Supervisors (IAIS).
“For example, the vast amount of liquidity injected by the central banks has created a potential inflation risk, although deflation might be striking in the short term,” the IAIS says in its report, Macroprudential Surveillance and (Re)Insurance. “Altogether, the universe of risk appears to have expanded, putting insurers and reinsurers in a stochastic [i.e. dynamic] world of increased uncertainty.”
These risks arise from multiple sources on various issues, the reports adds.
They include, among others:
• interest rates movement (stability or increase)
• sovereign debt crisis
• volatitlity of exchange rates
• impact of new regulation.
Overall, the reinsurance sector “fared comparatively well” during the financial crisis, the IAIS notes.
For example, the IAIS noted reinsurer losses during the crisis related mainly to the fall in investments due to asset deterioration; prices remained stable throughout the crisis; no diversified insurers failed; and there wasn’t a run on reinsurers.