Insurers could be forgiven for thinking they are having a bad dream – the one where you are taking an exam, only to find when you turn over the paper that you’ve studied the wrong subject.
In this case, the paper would be marked Solvency II, but examiners would have
moved on to asking about insurers and systemic risk.
With timing that has left many in the industry dumbfounded, the European Systemic Risk Board (ESRB) published a report in December – just weeks before the implementation deadline for Europe’s new directive – saying insurers contribute to systemic risk through pro-cyclical investment behaviour, and that something should be done about it.
The ESRB’s idea is to introduce a counter-cyclical buffer, similar to the measures in place for European banks.
The buffer would load additional capital requirements on firms in good markets and release some of the pressure in periods of stress.
Continue Reading “Insurers should prep for questions on pro-cyclicality” at Risk.net
