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Posted in European Union, Market developments, Regulatory and legislative updates, UK

Report: Insurance and structured finance – a new dawn?

A growing trend is emerging within the insurance sector, where insurers and other users of insurance products are looking to structured finance solutions both from an investment and risk management perspective.

What are the driving forces behind this development? Is regulation enhancing or impeding the trend? What role do insurers and other participants play in this new market?

On 10 November 2016, Hogan Lovells hosted a seminar to discuss these issues. Our panel of experts included Gavin Palmer from KPMG, Michael Eakins from Goldman Sachs, and James Doyle, Tauhid Ijaz and Steven McEwan from Hogan Lovells, who put forward their thoughts and shared their own recent experiences.  The issues discussed included the following:

  • What have you seen as the main drivers of insurers changing their approach to asset strategy following the introduction of Solvency ?
  • How can derivatives be used by insurers for the reduction of risks and efficient Solvency II balance sheet management ?
  • What are the main things that insurers have to be wary of when investing in a securitisation ?
  • What are the main reasons why insurers are increasingly looking to structured finance rather than traditional bond and equity markets ?
  • Given current uncertainty regarding Solvency II, Brexit, interest rates and the value of sterling, is now the right time to enter into significant transactions ?
  • To what extent are general insurers involved in this trend ?  Are these developments limited to the UK and the US ?
  • Over time, are we seeing the erosion of the traditional distinctions between insurers and banks ?
  • Is there a way to hedge an insurer’s risk margin and its rates position that won’t lock-in if the PRA changes its approach to calculation of the risk margin ?
  • What would each panellist single out as the main area of difficulty that insurers face in relation to their investment activity under Solvency II?

You can watch a video of the seminar on our website, and we have prepared a written summary that is available for download.  Please use the links below the access them:

Watch the video

Download the summary