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.

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