The Investment Management of Insurance Assets under Solvency II

Presented by

Gareth Mee, EY; James Hughes, Aberdeen Solutions; Euan MacLaren, NGAM UK; Martin Hurst, IPE

About this talk

This is the first in a series of three webcasts looking at Solvency II from the point of view of the insurance company CIO. The second and third will focus on alternative fixed income and real assets respectively. How suitable - or otherwise - are the current capital charges and what can we expect from the 2018 review? Solvency II was conceived in a normal yield environment; that, of course has changed and this is one reason for the review planned for 2018. Insurers are interested in the agreed thinking of what these should be and the prospects of them being amended to a level more representative of the associated risk. What is reasonable and what can we expect? What might the political obstacles be to, say, making a distinction for capital charge purposes between Spanish and UK government bonds? The impact of regulation on investment strategy We will explore the relative impact of matching adjustment, volatility adjustment and transitionals and the impact on investment strategy as a result. Consolidation How are insurance asset owners coping with the new regulation generally? Can we expect consolidation among insurance asset owners because of the increased regulatory burden? Use of internal models can lead to lower capital requirements, but they are very expensive to create, and are thus likely to be the preserve of the larger insurance companies. Smaller firms might club together to enable them to access certain types of investment, and might ultimately see acquisition by a larger firm as the only way both to do this on a consistent basis and manage the increased regulatory burden. Furthermore, a common regime across Europe should make it easier for potential buyers to assess exactly what they are buying. Other regulatory factors What will be the impact on investment regulation of Brexit on UK regulation, and on the investment management of insurance assets? What can we learn from other regulatory regimes from an investment standpoint?

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