General Insurance Article - BlackRock comments on Solvency II coming into force

Solvency II comes into force today and BlackRock’s EIU research* of global insurers found 49% consider regulatory change to be the most critical driver of industry change in the insurance industry over the coming 12-24 months.

 Patrick Liedtke, BlackRock’s head of Financial Institutions Group for EMEA, comments on the new regulations:“If you don’t get Solvency II right, you won’t attract capital to your business. Those with higher solvency ratios can branch out further and invest in higher returning strategies which carry higher capital charges with them. But for those with lower solvency ratios, this is becoming more difficult as monetary policy, strong demand for quality paper, and financial regulatory reform have contributed to reduced dealer inventories and lower bond turnover, pressuring fixed income liquidity.

 “Stricter capital requirements under Solvency II are pushing European and global insurers, particularly those with lower solvency ratios, to increase holdings of investment grade fixed income and diversify under tighter risk budgets.”

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