The regulatory backlash from the world financial crisis could curb the ability of the international re/insurance industry to do its job, said XL Group CEO Mike McGavick yesterday.

Speaking at the ALARYS Congress at the Fairmont Southampton yesterday, Mr. McGavick said the Solvency II regulations that will raise capital requirements for European Union insurers, would have negative implications for the industry globally.

He also told delegates of the great growth opportunities he sees in Latin America, particularly if the continent follows a different path to the increase in regulation occurring in Europe and the US.

Delegates from 17 countries are attending the conference of the Latin American Association of Risk and Insurance Managers. It is the second time the Island has hosted the event after first staging it in 2004.

The story of human progress was one of trial and error, Mr. McGavick said, and the re/insurance industry allowed more risk to be taken and more progress to be made.

The rise in regulation for the industry — exemplified by Solvency II — was a negative trend, he said.

"It was not the insurance and reinsurance industry that gave us the financial crisis," Mr. McGavick said. "Overwhelmingly, it has been a stabilising force in the economy.

"Many regulators I've spoken with around the world have misunderstood the lesson of the crisis. They think the lesson is to increase capital requirements.

"But we should not be learning the lessons of the failures of the banks and applying them to insurers. We should be applying the lessons of the industry that was successful to the banking industry."

Solvency II, which is due to take effect at the start of 2013, would almost certainly raise the quantity of capital insurers would need to do business. "I see this as very threatening to the ability of the industry to fulfil its role," the XL CEO added.

An industry obligated to hold unnecessary and inefficient capital would inevitably become less attractive to investors, Mr. McGavick said.

Another risk was that fewer financial centres, locations for capital creation, would emerge around the world. He added that the establishment of places like Bermuda, Singapore and Sao Paolo as financial centres had been good for the industry and for the stability of the global financial system.

The trends of tightening regulation and protectionism that the credit crisis had unleashed in Europe and the US were not evident in Latin America, where markets were continuing to open up. He gave the example of the reinsurance market in Brazil, where the state monopoly that had lasted 69 years ended in April 2008, allowing companies like XL Re to compete there.

If Latin America continued to head in a different direction to the US and Europe, then the continent could see "an explosion of growth and creativity", Mr. McGavick said. "While the rest of the world is so tied up with bad ideas, then you can sprint right past."

In an earlier session yesterday, Alexander Moczarski, CEO of Marsh Inc.'s International Division, spoke on risk management in the 21st century.

Increasing global interconnectedness and interdependence had emerged as major factors in widening the impact of events, he said.

As an example, he cited the collapse of US investment bank Lehman Brothers in September 2008, an event that sparked a choking global credit crisis.

Organisations were "obligated to manage the full spectrum of risk", Mr. Moczarski added. Enterprise Risk Management (ERM) was gathering traction and more companies had appointed chief risk officers. Mr. Moczarski saw growing evidence that companies were taking an organisation-wide view of risk, as "silos are being torn down".

Effectively implemented ERM could be "the difference between thriving and surviving", the broker said. He added that it was essential for C-suite executives to understand risk management and equally imperative for risk managers "to be able to speak the language of finance".

The conference continues through lunchtime today.