The Financial Services Authority (FSA) has highlighted priorities for insurance supervisors at the Economist's insurance summit 2013. Julian Adams, director of insurance supervision, said supervisors had to learn three main lessons from the financial and economic turmoil: the regulatory capital regime must be appropriate for capturing risk; no group should be "too big to fail"; and supervisors must be alert to non-banking firms, possibly outside the regulated sector, assuming risk, making them look, or act, like banks.
"We must be determined not to make the mistakes again," Adams told delegates. The capital framework for banks had been deficient, both in trading and core banking, for most of the pre-crisis period, he said, with two separate supervisory approaches to assessing bank capital, the formulaic approach, as in Basel I, and internal models.
"Both approaches failed, for different reasons, but equally comprehensively," Adams said. Many internal models were based on assumptions
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