3 August 2016 Insurance

GSII regulation will improve risk management: Moody’s

Moody’s has claimed that the global systemically important insurers (GSII) regulation, which will apply to nine companies allocated by the G20’s Financial Stability Board (FSB), is credit positive.

In a new report the rating agency said that this was due to the additional regulatory oversight and capital requirements on a group-wide basis, which will result in improvements in risk management and the development of contingency plans to restore or protect capitalization in stress scenarios.

The report, titled ‘Insurance -- Global FAQ: GSII, IAIG Rules Are Credit Positive; Won't Cause Broad Business Model Changes’, said that Moody’s does not expect any broad business model changes or any widespread reaction from groups allocated as GSIIs, as these insurers overall seem to hold sufficient buffers to comply with the new regulation.

"Overall, we consider the GSII regulation to be positive for policyholders and, to a lesser extent bondholder," said Benjamin Serra, Moody's vice president, senior credit officer.

"Some uncertainties remain for bondholders as, for some securities, coupon deferrals following a breach of regulatory capital requirements or regulatory intervention could be triggered more rapidly than for non-systemically important insurers, as a result of GSIIs' higher capital requirements."

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