Thursday, 21 June 2012
Nordic insurers need to adjust investment portfolios as a result of SII–Fitch
Nordic insurers will need to make bigger adjustments to their investment portfolios than their European peers as a result of Solvency II, according to Fitch. The changes will not need to be made immediately however as the rating agency believes the sector has enough capital to meet the capital requirements of the Directive.
Changes to investment portfolios are required because Nordic insurers are more heavily invested in equities.
Equities, which will attract a higher capital charge than short-dated high-grade fixed-income securities under Solvency II, make up 25% to 40% of Nordic insurers' portfolios, compared with a European average of 8%.
“We have already seen many European insurance companies reducing equity exposure, largely as a result of the financial crisis but also in anticipation of Solvency II. This could have a positive effect on corporate bond issuers–insurance companies represent a major source of demand in the Nordic regions,” said the rating agency.
The effects will not be dramatic in the short term, it continued, adding ‘we think that Nordic insurers are adequately capitalised to meet the more stringent requirements, and we expect any changes in asset allocations or business practices to happen gradually.’
Solvency II is not expected to come into effect until 2014.