Tag Archives: Capital Markets

Deal or no deal? US divided on EU insurance agreement

On the face of it, the insurance covered agreement announced on January 13 should be everything Donald Trump detests. Signed in the final days of Barack Obama’s administration, when Trump had already been elected, the deal is between the US and the European Union – an institution the new president has repeatedly disparaged.1343

It will pre-empt the authority of individual US state legislators and require them to defer to EU regulation of European insurers in US markets.

On top of that, the agreement was negotiated by the Federal Insurance Office (FIO), an Obama-era creation Republican lawmakers are keen to abolish.

Continue Reading “Deal or no deal? US divided on EU insurance agreement” at Risk.net

Solvency II rigors open P/C doors to specialty insurers

LONDON, (Reuters) — Hit by tougher regulation and lower investment income, European insurers are looking to sell portfolios of general insurance business closed to new customers, such as employers’ liability, medical negligence and motor policies.opendoors

The rise in capital buffers demanded by the Solvency II rules that took effect in January has prompted consolidation in the life and pensions market, but insurers are increasingly seeking to offload closed non-life business to specialist players.

“The stream of transactions has grown because of the activity around Solvency II,” said Arndt Gossmann, chief executive of German insurer Darag A.G., referring to a European non-life sector that consultancy Pricewaterhouse Coopers estimates to be worth about 250 billion euros ($284 billion).

Continue Reading “Solvency II rigors open P/C doors to specialty insurers” at Business Insurance News

Eiopa rules out single internal model indicator

The top EU insurance regulator with the purview of internal models has played down concerns that supervisors will use alternative indicators to second-guess the level of Solvency II Howdy, Solvency 2 Newscapital of internal model insurers.1-frankfurt-westhafentower-aussen

Vesa Ronkainen, the head of the Centre of Expertise in Internal Models at the European Insurance and Occupational Pensions Authority (Eiopa), admitted that a set of indicators could be used to trigger supervisory analysis, and ensure that the models remain fit for purpose over time.

But, in an interview with InsuranceERM, the Finnish actuary stressed these are intended to be simple tools that should not be looked at in isolation, and added they might not even be disclosed.

Continue Reading “Eiopa rules out single internal model indicator” at Insurance ERM News

Insurers keep stocks despite Solvency II cost, Silverfinch finds

Insurance companies remain invested in higher risk assets despite the cost pressure of Europe’s Solvency II Directive, which was expected to drive asset allocation into bonds, research has found.

John Dowdall, Stock-Marketmanaging director of Silverfinch, writes in the March issue of Funds Europe that the higher capital charges for holding equities has not put insurers off from owning them.

Under Solvency II, a directive that primarily targets the amount of capital insurers should hold to reduce insolvency risk, equities in OECD countries carry a 39% capital charge, while sovereign bonds carry as little as 0%.

Silverfinch, a data management firm that specialises in Solvency II, surveyed some of Europe’s largest fund managers to see if asset allocation had changed.

Continue Reading “Insurers keep stocks despite Solvency II cost, Silverfinch finds” at Funds Europe

Legal & General’s capital update outweighs profit rise

LONDON (Reuters) – Legal & General reported a capital position short of some forecasts on Tuesday, triggering a share price fall.

L&G shares were 5.5 percent lower at 1012 GMT, despite the British insurelegal-general-group-logor reporting a 14 percent rise in 2015 operating profit and an increased total dividend of 13.4 pence a share.

Traders focused instead on the insurer’s capital position, with new European Solvency II capital rules requiring hefty amounts of capital to write long-term insurance.

L&G said it had a solvency capital ratio of 169 percent under the new rules.

A ratio of 100 percent shows sufficient capital to cover underwriting, investment and operational risks.

Continue Reading “Legal & General’s capital update outweighs profit rise” at EuroNews

PRA chief must calculate cost of Solvency II

The chief executive of the Prudential Regulation Authority has been asked to find out what the cost of implementing Solvency II was to the industry.

Andrew Bailey, who will take over as dda90cb010b95d516847d06d9c86c935chief executive of the FCA once a replacement can be found for him at the PRA, was asked to look into the cost of Solvency II by the chairman of the Treasury select committee Andrew Tyrie.

The request came during a hearing on the costs and benefits of Britain’s membership of the European Union.

Solvency II is a European-wide regulation that specifies the levels of capital that insurance companies must hold and was more than 10 years in the making.

Continue Reading “PRA chief must calculate cost of Solvency II” at FT Advisor

Prudential to make first move on new capital rules

Prudential will this week set a benchmark for rivals by becoming the first of the UK insurers to reveal its capital ratio under the new Solvency II rules that came into force at the start of the year.solvency-ii-capital-rules

The Solvency Capital Ratio is a measurement of the amount of capital an insurer has as a proportion of the minimum requirement.

For 2014, Prudential reported a capital ratio of 218 per cent but analysts are expecting a lower number under the new rules.

“I am expecting something in the 180-190 per cent range,” said Barrie Cornes at Panmure. Analysts at Bernstein are also expecting a figure between 180 and 190 per cent, while UBS expects it to be above 180 per cent.

Continue Reading “Prudential to make first move on new capital rules” at Financial Times

Fitch: Solvency II Metrics Have Limited Use in Insurer Ratings

(The following statement was released by the rating agency) Link to Fitch Ratings’ Report: Solvency II Metrics – Limited Use in Insurer Ratings here LONDON, January 11 (Fitch) Solvency II (S2) metrics are not comparable between insurers due to their different calculation approaches and will therefore not be a direct driver of ratings, Fitch Ratings says. limited-use-only-label-qc-0136

Inconsistencies arise because many insurers are applying different transitional measures, which will strongly affect their metrics.

Some are also using internal models rather than the standard formula and we believe some regulators are taking a tougher stance than others in how they interpret and apply S2. We will continue to assess insurers’ capital primarily using our Prism Factor-Based Capital Model, as we believe Prism scores are more comparable than S2 metrics.

Continue Reading “Fitch: Solvency II Metrics Have Limited Use in Insurer Ratings”

 

One rule to bind them all

LIKE banks, insurers need a cushion of capital to ensure that they can meet customers’ claims in the event of unexpectedly big payouts or poor investment performance. As at banks, these cushions have at times proved woefully thin. In Bindingcordstheory, all that changes on January 1st—in the European Union, at least—when a new set of regulations known as Solvency 2 comes into force.

After more than ten years of negotiation, all European insurers will have to follow uniform rules on capital that are designed to make the firms more robust and allow investors and customers to assess their strength much more easily.

Not everyone is thrilled at this prospect. Mention “upcoming regulatory changes” to an insurance executive and a tirade inevitably follows about ambiguities and inconsistencies within the new rules, discrepancies in enforcement and the mountains of paperwork involved.

Continue Reading “One rule to bind them all” at Economist News

ESRB calls for bank-like countercyclical capital requirement for insurers

The EU’s top risk council is calling for the introduction of a countercyclical capital requirement and a liquidity requirement for insurers, in an unnerving report that passes critical judgement on the Solvency II regulation.bank_645x400

With two weeks until the new regime comes into force, the European Systemic Risk Board (ESRB) argues that the reduction in insurers’ capitalisation achieved through the use of Solvency II’s long-term guarantee package poses risks and casts doubt over the effectiveness of mitigating measures, such as the requirement for firms to produce liquidity plans.

The report points out flaws in the design of the volatility adjustment (VA), noting it potentially creates incentives for insurers to indulge in pro-cyclical investment strategies.

Continue Reading “ESRB calls for bank-like countercyclical capital requirement for insurers” at Insurance ERM News