The implementation of Solvency II will place restrictions on the investment strategies of many insurers. Intelligent Insurer speaks to the team at BNY Mellon about the investment options open to insurers facing tighter capital regulation.
The implementation of Solvency II will require insurers to understand their liabilities better, to take more focused investment risks and to hold additional capital against any mismatch with their liabilities’ duration. This is the opinion of Charles Pears, head of insurance at Insight Investment, a subsidiary of BNY Mellon.
“It will be particularly difficult for general insurers because they typically hold short-dated, fixed-income assets and are already struggling to generate a real return in a higher inflation, low interest rate environment,” he says.
For longer-term investments insurers have, in the past, relied on traditional investment principles to deliver returns. But that was in a more liberal capital market environment. The new paradigm of tighter market regulation means insurers must reassess how they manage risk and generate investment returns, argues Jamie Lewin, head of asset allocation at BNY Mellon Asset Management.
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Reinsurance, Insurance, Capital management, BNY Mellon, Investment services