Revised liquidity premium ‘compromises economic basis of Solvency II’

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The inclusion of a liquidity premium for all liabilities longer than one year in the European Commission’s (EC) draft technical specifications for the fifth Solvency II quantitative impact study (QIS 5) compromises the economic basis of the directive, according to a leading UK insurer. The EC proposed that half the liquidity premium applied to annuities should also be applicable to all liabilities longer than one year. But according to Simon Gadd, head of annuities at London-based Legal