Wednesday, 24 August 2011

Implications of financial regulatory reform for the insurance industry - IIF and Oliver Wyman Paper

I managed to get a good look at the paper reported widely last week on how Basel III and Solvency II appear to have conflicting end-games, which could prove calamitous for banks should there not be at least some cognisance of each other's ambitions - thanks a bundle to the guys at Oliver Wyman for sending me a copy gratis (just fill in the form here to get your own, much trickier from the IIF website).

More important to note the additional lobbying angle and indeed the people behind it (Zurich's CRO and Swiss Re's CEO appear to be prominent in the IIF's insurance working group, with Allianz and Aviva also participating), rather than the minutae of the report (which is less than 30 pages regardless).

It of course points out the folly of EU government debt being "risk free" in the current environment, but also shows the differing capital requirements for corporate bonds in the NAIC, Basel III and Solvency II approaches, highlighting how relatively onerous long-term corporate debt will in terms of capital consumption, despite the fact that long-term bonds are ideal from an ALM perspective for many insurance products.

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