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06

Solvency II 'will push Nordic insurers from equities to bonds'

Open-access content Thursday 14th June 2012 — updated 5.13pm, Wednesday 29th April 2020

Nordic insurers will have to make above-average adjustments to their investment portfolios because of the likely requirements of Solvency II, according to Fitch Ratings.

Equities currently account for 25-40% of Nordic insurers' portfolios, compared with a Europe-wide average of 8%, the ratings agency said yesterday.

Under Solvency II, the higher risk associated with equities means they will attract a higher capital charge than short-dated high-grade fixed income securities, and Fitch said it expected this to prompt a marked move from equities to bonds by Nordic insurers.

'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,' it said.

'This could have a positive effect on corporate bond issuers - insurance companies represent a major source of demand in the Nordic regions.'

Fitch noted, however, that it did not expect any dramatic changes in asset allocations in the short-term.

'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, with the changes then being phased in to smooth the transition.'

This article appeared in our June 2012 issue of The Actuary .
Click here to view this issue

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