IIF warns Solvency II risk charges may lead to imprudent asset allocation by insurers
Solvency II could encourage insurers to hold poor quality or low-rated debt, which may be “inconsistent” with prudent asset allocation, the Institute of International Finance (IIF) has warned.
The IIF argued that the capital charges applied to certain asset classes under Solvency II could result in large alterations to insurers’ portfolios and induce insurers to hold high volumes of European Economic Area (EEA) sovereign debt and also short-dated, lower quality corporate bonds.
Under Solvency II
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