Global systemically important insurer (G-SII)
Status designating insurance groups whose failure could threaten global financial stability, subject to enhanced oversight.
The status of global systemically important insurer designates insurance groups whose size, interconnectedness or non-traditional activities could, in the event of failure, propagate a shock to the whole financial system. Introduced after the 2008 crisis, echoing systemic banks and inspired by the case of the US insurer rescued for its derivatives exposure, this designation was to come with enhanced capital and oversight requirements. The entity-designation approach was, however, contested and gradually abandoned in favor of an activities-based approach, the IAIS developing a holistic framework that monitors potentially systemic activities across the whole sector rather than a list of named insurers. This shift reflects a substantive debate: traditional insurance, where liabilities precede assets, is generally judged less systemically risky than banking, the risk concentrating mainly in non-traditional financial activities. For the observer, this topic illuminates the specificity of insurance systemic risk.
Rather than designating a list of systemic insurers, the holistic framework the IAIS adopted in November 2019 monitors systemically risky activities, such as certain financial guarantees, across the whole sector.
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