As businesses whose activities were once limited by geographical conditions are now able to access a broader market, they are also more likely to be able to commercialize services which meet the niche demands of consumers, thereby providing consumers with more choices.
No single, uniform approach to capital regulation is appropriate for companies in both sectors. The banking capital framework would not appropriately assess the capitalization of insurers. It is primarily based on risk-weighted assets. This framework would not capture many of insurers’ liability risks, such as from natural catastrophes. Nor would any existing insurance capital rule appropriately assess the risks of a bank.