Bankers and insurers speak very different languages – though both hack a living out of the financial services jungle. Their vocabulary is different; indeed, their mindsets are different. Concepts that appear virtually identical in each area are, in fact, very different in their application.

Linked to that is the easy assumption that bankers know it all – and that insurers are (in the happy phrase used by our author) little more than “bankers’ idiot cousins”. Of course it’s not true. But what is true is that the new Basel Accord was written by bankers, primarily for bankers, and that – when it deigns to acknowledge the role that insurance can play – it does so through a banker’s eye, which means that, too often, it asks questions of the insurance industry that it cannot answer.

This is the third paper that Shirley Beglinger has written for the CSFI – and it is probably the most challenging. What she says makes uncomfortable reading, both for the Basel Committee itself and for the insurance industry. There is a mismatch between the new rules and the role that has been allocated to insurance that will be very hard to straighten out. That said, she does (as one would expect) offer her own set of recommendations.