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Title:Will Solvency II market risk requirements bite? The impact of Solvency II on insurers' asset allocation PDF Logo
Authors:Höring, Dirk
Issue Date:2012
Series/Report no.:ICIR Working Paper Series 11/12
Abstract:The European insurance industry is among the largest institutional investors in Europe. Therefore, major reallocations in their investment portfolios due to the new risk-based economic capital requirements introduced by Solvency II would cause significant disruptions in European capital markets and corporate financing. This paper studies whether the new regulatory capital requirements for market risk are a binding constraint for European insurers by comparing the market risk capital requirements of the Solvency II standard model with the Standard & Poor's rating model for a fictitious, but representative, European-based life insurer. The results show that for a comparable level of confidence, the rating model requires 68% more capital than the standard model for the same market risks. Hence, Solvency II seems not to be a binding capital constraint for market risk and thus would not significantly influence the insurance companies' investment strategies.
Subjects:Solvency II
Rating
Market Risk
Capital Requirements
Document Type:Working Paper
Appears in Collections:ICIR Working Paper Series, International Center for Insurance Regulation, Universität Frankfurt

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