Borrowers fear Solvency II will hit demand for corporate paper
The risk-based capital charge due to come into effect in 2013 as part of the Solvency II requirements is set to reduce insurance companies’ demand for credit, particularly longer-dated paper. Credit looks at whether this has already started to feed through to changed patterns of behaviour within the fixed income markets
During the many years that Solvency II has been debated, the working assumption in the insurance industry has broadly been that its implementation will have major implications for asset allocation. In particular, the inclusion of insurers’ investment policy, in terms of asset allocation and asset duration, in capital requirement calculations under Solvency II is broadly anticipated to be negative for the credit market.
“Solvency II provisions on corporate bonds, as stipulated in the fifth
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