Insurers must prepare for a wave of new regulation over the next year and at the same time look at how best to serve consumers in an increasingly digitised way, industry leaders and legal experts have said.
Speaking at an industry forum on the future of general insurance distribution organised by Pinsent Masons, the law firm behind Out-Law.com, assistant director of the Association of British Insurers (ABI) Jonathan de Beer identified the Solvency II reforms as a particular challenge that UK insurers will need to address.
Some would describe the EU’s Solvency II framework as “a monster” and there was a concern it has been “over-engineered”, de Beer said, referring to the length of the new legislation and the fact that it has been approximately 15 years in the making.
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Plunging rates on government bonds in Europe are forcing life insurance companies to seek out other asset classes as they must meet obligations on guaranteed insurance policies. Almost half of Storebrand’s asset allocation for guaranteed policies in Norway is invested in hold-to-maturity bonds. As bonds mature, the Oslo-based company must reinvest while finding returns high enough to cover guaranteed rates.
Storebrand, which has 535 billion kroner ($65 billion) under management, has about 11 percent of its customer portfolios, with rate guarantee in Norway, invested in real estate. The average return on real estate in Norway is about 4.8 percent, according to Grefstad. While the company invests in mortgage and corporate bonds mostly from Norwegian and Swedish issuers, it also looks for opportunities from other European issuers that sell in the Norwegian or Swedish currencies.
Continue Reading “Norway’s Storebrand Buys Real Estate, Mortgages to Escape Negative Yields” at Insurance Journal News
The German pensions industry has issued a “clear rejection” of any attempt to standardise solvency requirements across European pension funds, according to Joachim Schwind, chairman of the German Hoechst Pensionskasse and board member at German pension fund association Aba.
At this week’s Handelsblatt occupational pensions conference in Berlin, he pointed out that the holistic balance sheet (HBS) approach was “really a Solvency II concept with additional regulation for occupational pensions”.
As such, he said it was highly complex and increased costs without taking sponsor support into account.
Continue Reading “German pension fund association vows to keep fighting HBS ” at IPE News
The European Commission (EC) is open to easing the rules for insurers investing in securitised products, as part of the legislative reforms to build a capital markets union (CMU), according to Jonathan Faull, director-general for financial services at the EC.
Under Solvency II, the senior tranches of safe and transparent securitised products are treated in line with investments in the underlying assets, but junior tranches attract exorbitant capital charges.
In the case of AAA-rated securitisations, a 2.1% charge applies to senior tranches and a 12.5% charge applies to junior tranches.
Continue Reading “‘Anything is possible’ in SII securitisation charges revamp” at Insurance Asset Risk
Rabbani Choudhury of Pinsent Masons, the law firm behind Out-Law.com, said that the Prudential Regulation Authority (PRA) would be looking for a “high standard” of evidence from firms that they are eligible for a partial exemption from the general solvency requirements because some of their assets were not as sensitive to market fluctuations as other assets.
From 1 April, PRA-regulated insurers will be able to apply to use a ‘matching adjustment’ (MA) when calculating their capital requirements under the Solvency II regime, removing the requirement for them to compensate for market volatility that they are not exposed to.
Continue Reading “Large UK insurers should prepare to submit Solvency II matching adjustment applications, expert says” at Out-Law News