Swiss Re says Basel III will aid reinsurers

THE NEW rules on banking capital are good news for reinsurance companies, the chief economist at reinsurer Swiss Re said yesterday.

“Banks’ capital charges have been rightly raised by quite a bit. At the centre of the crisis were the banks, not the insurers,” said Thomas Hess.

Banks have been providing hybrid capital and other capital substitute products, he said, but the Basel III regulations may shift that power towards reinsurers.

Hess claimed Basel III will have a much bigger effect on the financial world than the Solvency II rules that are set to reform the insurance industry. “Banks will have much bigger challenges to cope with the new regulation than insurers will,” he said.

However a member of the European Central Bank governing board played down the effects of Basel III on the economy yesterday. “It is argued that, by placing additional burdens on banks, their capacity to hand out loans is constrained to a degree that might reduce economic performance,” said Axel Weber.

“However, recent studies by the Basel Committee...and others show that the impact of financial reforms on economic performance is likely to be rather small.”