Insurers forced to choose between imperfect inflation hedges

Inflation is predicted to rise but hedges against it are getting harder to put in place

Inflation rate

UK inflation looks set to reach nearly 3% by the end of 2017, according to estimates from Fitch Ratings – a disquieting prospect for UK insurers that sell bulk annuities and have to hedge big books of inflation-linked liabilities.

While inflation risk is not explicitly recognised within Solvency II's standard model, the expectation is that insurers using an internal model will hold capital against the risk of an increase.

At the same time, close matching of assets and liabilities to enable firms

To continue reading...

You need to sign in to use this feature. If you don’t have a account, please register for a trial.

Sign in
You are currently on corporate access.

To use this feature you will need an individual account. If you have one already please sign in.

Sign in.

Alternatively you can request an individual account here: