In the 2008 financial crisis, the most costly bailout was not of the Royal Bank of Scotland or Citigroup but that of insurer AIG, the Financial Times reported. The US government spent $182 billion to bailout the insurer which was more than double for RBS, the next largest casualty. Even if the investment already turned a profit by 2012, the report said it does not change the fact that the largest collapse came from a company that nominally called itself an insurer but diversified so quickly that managing or regulating it became impossible.

Politicians, regulators and the general public have placed their attention in banks in the wake of the financial crisis. However, the problems that now beset Britain-based RSA which occurred just after five years after the collapse of AIG is a useful reminder that insurance firms need to be monitored as well.

The good thing about RSA is that it is not a large company. Compared to the $1 trillion balance sheet of AIG when it collapsed, RSA's assets only reached barely $23 billion. Its services are also relatively straightforward, focusing mainly on insurance coverage for buildings and cars. Despite the need of as much as £1 billion in capital, there is no suggestion that its problems are insoluble.

However, the report said RSA's case should still be a cause for alarm. The black hole in its Irish unit serves as a reminder that it can be fairly harder for an insurer than a bank to judge risk and accounting. It also becomes harder for management and regulators to manage risks when mergers and acquisitions are used to grow the company. Like AIG, the growth of RSA's Irish unit was driven by aggressive deals.

This is why it's even more crucial to put the focus on insurance firms are many of them get ready to diversify their business models from just simple underwriting, the report said.