This is a line of enquiry which should be further explored to arrive at what constitutes the optimum level of financialisation. A recent Working Paper of the International Monetary Fund entitled “Too much finance?” seems to confirm some of the broad conclusions of the BIS Paper I referred to (Arcand et al, 2012). Let me summarise the main findings.
There is the prospect of some consolidation with the purchase of AMI by IAG (subject to regulatory approvals), and we are seeing changes to reinsurance capital requirements and availability of insurance. We can expect that there will be changes, and that the industry will adjust.