Spotted by his Lordship John Walton this morning, L&G appear to have broken the mould by dropping some substantive Solvency II comment into their Q3 IMS, notably that they have booked £129m of costs in project spend.
They also go on to plead unhappiness on the inability of the rules as they stand to encourage the provision of long-term capital to the wider economy, echoing DG Faull's rollocking letter to Sr Bernadino the other week on longer-duration debt instrument capital costs, though are clearly only interested in UK investment opportunities as opposed to loading up on fruity Eurozone government debt (good on you!).
Of course the Solvency II preparation costs of most of the big-boys have been covered on this blog before, and £129m feels suitably light for a UK-focused business in comparison to some of its more complicated competitors. That said, with the FSA offering some hope of a transition to "ICA+" rather than dual running ICA and IM SCR for the next x years, how much leverage does this sort of investment buy a firm down at Canary Wharf when it comes to meeting the transitional criteria?
Look forward to seeing a bit more of these disclosures over the next week or so now we are in IMS season, but not counting on it!
An online repository for Solvency II, ERM and Corporate Governance material and comment from the Principal of Governance Matters, an independent Risk Consultancy firm based on the Isle of Man.
Showing posts with label debt. Show all posts
Showing posts with label debt. Show all posts
Monday, 5 November 2012
Wednesday, 31 August 2011
Solvency II and asset allocation - mixed messages
There seems to have been a suite of materials on Solvency II and predicted asset allocation impacts recently, from the great and good (Gideon on the Solvency II Wire has kept on top of these, and I took a look at the Oliver Wyman/IIF document last week - much of the materials pointed towards a drive towards short term EU government debt (capital-free, and no duration penalties) ahead of where an insurer may traditionally have invested for policyholder benefit, corporate (and specifically bank) debt.
There were some left-of-centre views that I spotted, one from a representative of Markit opining that, in the current climate, government debt was now being viewed as riskier than Western European corporate debt. Another covered the potential for Insurance Linked Securities demand to increase under Solvency II, thus necessitating more issuance to be EU-based (as opposed to traditional homes Bermuda or Cayman). The third came from Union Banque Privee, with research cited in the FT that, with appropriate asset selection (cheeky derivatives used as examples), asset arbitrage will allow insurers to obtain exposure and performance without necessarily holding onerous amounts of capital as prescribed under Solvency II.
The first then indicates that the weightings may need a genuine re-examination with the Eurozone debt issues as the backdrop, while the other two suggest there are investment options to counter the new requirements. Is the IIF research therefore much ado about nothing, or perhaps is the mighty banking lobby having one last "flex of the guns" before its emasculation over the next few years?
There were some left-of-centre views that I spotted, one from a representative of Markit opining that, in the current climate, government debt was now being viewed as riskier than Western European corporate debt. Another covered the potential for Insurance Linked Securities demand to increase under Solvency II, thus necessitating more issuance to be EU-based (as opposed to traditional homes Bermuda or Cayman). The third came from Union Banque Privee, with research cited in the FT that, with appropriate asset selection (cheeky derivatives used as examples), asset arbitrage will allow insurers to obtain exposure and performance without necessarily holding onerous amounts of capital as prescribed under Solvency II.
The first then indicates that the weightings may need a genuine re-examination with the Eurozone debt issues as the backdrop, while the other two suggest there are investment options to counter the new requirements. Is the IIF research therefore much ado about nothing, or perhaps is the mighty banking lobby having one last "flex of the guns" before its emasculation over the next few years?
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.
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.
Subscribe to:
Posts (Atom)