Swiss Re Insurance-Linked Fund Management

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Insurance linked securities to benefit from Solvency II


The CEIOPS report that I wrote about yesterday contains some interesting insight into how the Committee of European Insurance and Occupational Pensions Supervisors sees Solvency II affecting the insurance linked securitization market, they consider the 2012 implementation of the new regulatory framework to be key for ILS.

Not only will Solvency II recognise derivatives and securitisation as effective and viable risk mitigation techniques, it will be much less restrictive than the current Solvency I environment we deal with today. Issuers will need to convince regulators that a true transfer of risk has occurred during the deal.

Specific treatment of ILS under Solvency II is still under discussion but CEIOPS say they can see insurers utilising them much more due to the changes in regulation and how this will affect the capital requirements of the issuer.

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