Insurers should stop using liquidity swaps - FSA

FSA Canary Wharf

Insurers should invest directly in long-term assets rather than through collateral upgrade trades with banks, a senior official from the Financial Services Authority (FSA) has said.

Andrew Bailey, managing director of the Prudential Business Unit at the FSA in London, speaking at an event in London, said he would prefer that insurers did not undertake these trades, because of the systemic risk they pose, but that banning them was too extreme.

In collateral upgrade trades or liquidity swaps, insu