European Union insurance watchdog will review proposed Solvency II regulations
The European Union’s insurance watchdog has launched a study of proposed capital and risk management rules. Insurers expect the study to show that a major rewriting of life insurance rules will be needed, adding to repeated delays in the introduction of the new regime.
The European Insurance and Occupational Pensions Authority ( EIOPA) does not expect that Solvency II will come into force earlier than 1 January 2016. Germany’s insurance watchdog suggests that a 2017 start may be more realistic. “If these seemingly technical details of the new regime are not correct, the impact on the European insurance industry, its clients and the economy would be severe,” says Olav Jones, deputy director general of Insurance Europe.
Some life insurance companies predict that Solvency II will make their products unviable because of requirements forcing greater capitalisation and products with guaranteed returns to customers.
European insurers diversify risks to boost returns
European insurers and asset managers are lending to big-ticket infrastructure projects, companies and property developers where banks might no longer be able to, in order to diversify their risk and boost returns.
Europe’s second-largest insurer, AXA, is teaming up with Société Générale to lend to small- to mid-sized companies. “We are reopening some boxes that have been closed since 2008 in the crisis,” says Laurent Clamagirand,
AXA’s chief investment officer. Over time, AXA is likely to boost investments in corporate, infrastructure and other types of debt to between 10 and 20 per cent of its €40 billion ($53.4 billion) of yearly investments from all but zero as recently as five years ago.
In France, BNP Paribas Investment Partners recently launched its third corporate debt fund for insurers in a year, and in Northern Europe, Swiss Re is to invest $500 million in senior debt issued by northern European infrastructure projects. In the UK, Legal and General’s asset management arm completed a $190 million loan deal last year with student housing specialist Unite Group, while in France.
Europe’s largest insurer Allianz is taking a tentative approach to corporate loans. It has, however increased its presence in areas like commercial real estate where some recent loans are yielding 1.5 to two percentage points more than the equivalent sovereign bonds.