Third, I will examine how the British state has involved itself in the affairs of insurance companies over the past 500 years. Finally, I will ask what – if anything – we can learn from this as we enter the Solvency II era. My main conclusion, which may make me unpopular with many colleagues and members of the insurance industry, is a simple one: Solvency II is a big and important change, but – when viewed in the context of history – we are still sailing the same ship, in broadly the same direction. Why do we regulate insurers? Individuals and institutions give money to insurance companies to transfer the cost of risks they could not otherwise bear. In doing so, they trust that the insurer will make good on its promise in the event that the insured risk crystallises. Indeed, the word policy comes from the Italian “polizza”, which meant a promise or an undertaking. Like banks, insurers invest policyholder funds directly onto their balance sheet thereby exposing customers directly to the risk inherent in those balance sheets. Our job at the PRA is to make sure that insurance companies keep their promises to pay policyholders and do not let them down, often when they need that money the most.
Jaime Caruana: Basel II and corporate governance issues Speech by Mr Jaime Caruana, Governor of the Bank of Spain and Chairman of the Basel Committee on Banking Supervision, at the 2nd Islamic Financial Services Board (IFSB) Summit 2005: The Rise and Effectiveness of Corporate Governance in the Islamic Financial Services Industry, Doha, 24 May 2005. *  *  *  Introduction and overview I would like to thank His Excellency Governor Abdulla Khalid Al-Attiya and the Qatar Central Bank the hospitality and Professor Rifaat and the Islamic Financial Services Board for inviting me to speak this evening before such a distinguished gathering. It is a great honour for me to be here at what I am sure will be a most successful and rewarding Summit. I consider it a privilege to have the opportunity to share with you some thoughts on two timely and important topics: corporate governance and the Basel II capital framework. My contribution to this important conference comes with a degree of humility. Although I understand that some of the roots of Islamic finance can be traced back to my own country during the time it was known as al-Andalus, I cannot claim to be an expert in Islamic finance, and I certainly would not presume to talk about the specificities of Islamic banking before such a knowledgeable audience. Suffice it to say that we all know that there are differences between Islamic banking and what we normally refer to as “conventional” banking.