Insurance companies shouldn't be subjected to the same level of stricter regulations being imposed on banks after the financial crisis, Swiss Reinsurance Co (RUKN.VX) chief economist Thomas Hess said Tuesday.

The comments were in reaction to the European Central Bank President Jean-Claude Trichet who, two weeks ago, said the traditional view that insurers and pension funds aren't generally potential sources of systemic risk "needs to be challenged."

Trichet also said that large insurers should be considered "systemically relevant" by financial regulators.

"Trichet is of course right in saying that insurers are relevant for capital markets and also for the functioning of the insurance system. But the key question is not whether they are relevant for the system, but it's in knowing the needs of systemic regulation," Hess told reporters.

"For banks that may mean, for example, decreasing leverage, increasing capital requirements and maybe restrictions on some business as a result of this crisis and of the exaggerations which happened there... If you say insurance companies and pension funds need to be regulated in the same way, I think this is not the right way to go forward," Hess said.

Hess's comments come after German insurer Munich Re AG (MUV2.XE) two weeks ago also rejected suggestions that the insurance industry could pose the same level of risks as the banks to the general economy.

"The insurance industry... is a relevant factor for the real economy because it allows the spreading of risks. Therefore, it's a highly useful industry. From that angle, it is systemically relevant, but it's nothing compared with the big banks. So, there's no domino effect or things like that from insurers," Munich Re Chief Financial Officer Joerg Schneider told Dow Jones Newswires.

Hess also said the causes of the financial crisis came mainly from the banking industry, including loose monetary policy, loose credit standards, particularly in the area of subprime mortgages, and weak risk management at banks. He said credit provided by banks became "too easy and too cheap."

Hess said the business model of an insurer is different from a bank. He said there is less liquidity risk in insurance because the business is pre-funded through premium payments and insurance liabilities are triggered by insured events.

On the other hand, many of the liabilities of a bank - including its deposits, saving accounts and commercial paper - are short term, therefore posing the risk of a quick bank run should it face a crisis.

"There is very little contagion in insurance and we have no interbank market like the banks do. Unwinding is much less a problem in insurance than banks," Hess said.

-By Vladimir Guevarra, Dow Jones Newswires; +44 (0) 2078429486, vladimir.guevarra@dowjones.com