Bank of Russia suggests revising approaches to insurers’ investment activity

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The regulator’s initiatives are aimed at improving financial resilience and creditworthiness of insurance companies and will help expand the possibilities for investing insurance assets into high-quality instruments.

Consultations with representatives of the insurance community have resulted in the proposed abolition of obsolete restrictions on investment in corporate bonds and bonds of Russian constituents and municipalities. Lifting the ban on investing reserve options and guarantees in derivatives was also proposed.

In order to mitigate concentration risks, investments in assets issued by a single legal entity or a group of interconnected entities are supposed to be reduced to 10% of insurance reserves and the equity investment ratio. To comply with this requirement a three-year transition period will be introduced.

Given that investments in real estate do not fully meet liquidity requirements, their ratio is supposed to be gradually reduced capping the total value of real estate and the value of a real estate item at 25% and 10% respectively.

In order to increase insurers’ financial stability, the threshold value of the equity/liability ratio is supposed to be raised to 1.3 (gradually throughout the year). This will allow insurers to have an equity cushion for payments to cover a large insurance loss.

The Bank of Russia is planning to discuss the above measures along with other regulatory efforts with the All-Russian Insurance Association to draft respective regulations.

9 августа 2018 года

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