Giving insurance the attention it deserves
Many people study economics and law, but only a few can say they have a degree in mathematics and law. Claude Wirion is one of them. The knowledge he acquired by combining these two fields of expertise has proven extremely useful for leading the commissariat aux assurances (CAA), Luxembourg’s dedicated insurance regulator.
Several leading insurance companies have chosen Luxembourg as their new EU-base following Brexit. Did you expect Luxembourg would get this level of interest?
Yes, to some extent, we did. Given Luxembourg’s long-standing international expertise, we anticipated that we would be shortlisted by many insurance companies. When analysing the options of insurance companies domiciled in London, it was clear that companies which only operated in the UK would be able to continue working out of London. However, those which have a large part of business activities in the EU would need to find other solutions. For instance, large American insurance companies that have a dense network of branches across the EU, would not be able to fall back on the UK as this would halt their activities in the European Union.
Which insurance companies are planning to establish their EU hub in Luxembourg?
Leading companies such as AIG, FM Global, CNA Hardy, Hiscox, Liberty, RSA Insurance Group and Tokio Marine have announced their intention to come to Luxembourg. I expect other announcements to be made. Luxembourg is also on the shortlist for many P&I clubs given that they too need to find a new domicile to serve the European market. Two of them, West of England Shipowners Mutual Insurance Association and Shipowners’ Mutual Protection & Indemnity Association, are already present in Luxembourg.
Where did the CAA’S expertise come in?
We have been able to provide examples of large companies, such as Swiss Re, that for many years have operated out of Luxembourg to serve the EU market. Our expertise to analyse and approve their internal models and monitor their functioning on an on-going basis has been important for the likes of AIG and others. Also, for many years we have closely co-operated with regulators in other financial centres such as London and Frankfurt. Through these common international projects, we have developed a profound expertise in cross-border insurance.
You are entirely dedicated to the insurance sector. Has this been of any help?
Yes, absolutely. We don’t have a long queue of insurers waiting to be served after the banks. Although insurance has certain contact points with other financial services, the overall regulatory framework and standards are different.
If regulators need to manage all banking issues as well, there is always a risk that the work isn’t done as well as it can be. Many countries have integrated regulators. They often have specialised departments for insurance, but they can only take decisions up to a certain level. They then need to pass it on to a general management committee.
Unfortunately, when dealing with multiple files from banks and other financial institutions, insurance is not always their priority. At the CAA, from top to bottom, we provide a dedicated service. The expertise is available on all decision levels, and that is precisely what the insurance sector appreciates. I hope we can maintain this model.
What is your view on dedicated insurance supervision on European level in context of possible transferring of some responsibilities away from the European insurance and occupational pensions authority (EIOPA) or merging it with another of the European supervisory authorities (ESAS)?
There are talks at a European level to merge, but not everyone supports the idea. I can only observe that this debate is not always serene and very much influenced by Brexit. EIOPA firmly believes that the maintenance of distinct bodies will be required.
Such moves would not lead to better EU-level supervision or increased convergence in the way national authorities supervise insurance. Conduct of business and prudential issues are interlinked and changes would dilute the insurance expertise that EIOPA has built since it was created. There is also no evidence that another EU supervisory structure would work better and justify the costs, risks and years of uncertainty that would accompany any significant structural changes.
Many European countries have an integrated regulator but, outside Europe, not all countries have opted for this model. Large countries such as the U.S. or China have dedicated regulators for the insurance sector.
EU regulators are intensifying a drive to prevent financial groups from setting up shell companies in continental Europe to sidestep the effects of Brexit. What’s your view about this?
The guidelines by EIOPA are very clear and we fully support them. We deal with large groups that already have a substantial presence in the EU. There is no reason to needlessly remove people from other EU countries, but we make sure that each of the groups have the management based in Luxembourg and that these teams have the skills and capacity to control all the activities of the company.
Other European regulators seem to have problems hiring staff. Are you in the process of growing your teams?
We take the recruitment of new people seriously but have never strengthened our teams to simply meet quantitative targets. Our search for talent is solely focused on our own needs and driven by adding quality.
We have been hiring additional staff throughout 2017. We provide training to junior staff and build their skills by introducing them to files with a high degree of routine and then gradually increase the level of complexity. The most senior and experienced people work on Brexit-related applications. We have been very fortunate that we have been able to attract brilliant people with fantastic expertise
to work for us.
You have been working for the commissariat aux assurances for nearly 25 years. As well as graduating from the école nationale d’administration, you also hold a masters degree in law from the University of Paris1. Was it your goal to develop a career in insurance supervision? What do you like about your work?
I started my career at the Luxembourg Ministry of Finance, which was located opposite the offices of the insurance regulator. At one point in time, they were looking for an actuary and convinced me to join them.
Although it was a coincidence that I had a degree in both mathematics and law, the combination of these two areas turned out to be very useful for my work as a regulator. I have always loved the diversity of the work.
Insurance supervision requires technical and mathematical skills as well as a deep understanding of multiple legal sectors: company law, accountancy law, inheritance law, etc.
Based on the recent results published by the CAA, are you confident about the future growth and global importance of the insurance sector in Luxembourg?
Absolutely. The first six months of this year have been encouraging overall. Growth in the insurance market activity increased in the second quarter of 2017, with insurance premiums increasing by 26.94% compared to the same period last year.
Total inflows increased by 16.28%, with premiums up by 17.81% in life insurance and by 6.98% in the non-life insurance sectors. We are cautious about being too optimistic because the market is quite dynamic now. But it is clear that there is long-term confidence in Luxembourg as a cross-border centre for insurance.
Communiqué par Luxembourg for Finance
Source photo : LFF