|The Impact of Solvency II on Bond Management|
|Thursday, 26 July 2012|
Solvency II, which will come into effect in 2014, will have a significant impact on the way insurance companies, as well as financial markets, perceive risk. One of the major changes with Solvency II is the treatment of market risks, which represent an additional capital cost that now needs to be incorporated into the analysis of insurers’ investment choices.
In this study entitled, “The Impact of Solvency II on Bond Management”, the EDHEC Financial Analysis and Accounting Research Centre analyses the impact of Solvency II on insurers’ bond management practices. The authors consider the appropriateness of the bond solvency capital requirement (SCR) as a risk measure, the effects of this risk measure on bond management within a return-volatility-Value-at-Risk-SCR universe, and whether Solvency II will give rise to a new bond hierarchy and arbitrage opportunities.
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