In a new report from DBRS Morningstar discussing the Solvency II prudential regime, the rating agency has noted that the new rules are not expected to materially change EU and UK insurer’s risk appetites.
DBRS’s analysts explained in the report that both in the EU and the UK, one of the main goals of the Solvency reform is to free up capital resources and “facilitate insurers’ investment in long-term assets” without affecting their capital position.
“In doing so, insurers are expected to better contribute to economic growth and financing sustainable initiatives,” the report explained.
DBRS’s analysts continued, “We note that, notwithstanding the changing macroeconomic landscape, both in the EU and the UK insurance companies have maintained high solvency ratios in recent years.
“On top of this, the less strict capital rules are not detrimental to EU and UK insurers’ capital position and we believe that the new rules should not ultimately affect their risk appetite and asset allocation materially.”
Mario De Cicco, Vice President, Global Financial Institutions at Morningstar DBRS, added, “Most of the Solvency II amendments are expected to benefit mainly life insurers.
“Thanks to the revised measures, insurance companies with a long-term liability profile will not only be able to deploy additional capital resources but will also be able to invest them in a wider range of long-term assets without facing much higher capital constraints.”
