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Any change in the way regulators treat government bonds could have substantial repercussions for insurers, which are among the most voracious buyers of sovereign debt as a way of underpinning their long-term obligations to policyholders with low-risk assets.
Government debt is considered risk-free for insurers, which do not have to set aside capital on their balance sheets to cover any potential risk. However, the eurozone crisis has already forced banks and insurers to accept that Greece will write off some debt, while other countries face mounting doubts over their ability to repay.
Gabriel Bernardino, chairman of the European Insurance and Occupational Pensions Authority, said the insurance sector needed to “take the right lessons from the crisis” and questioned what assets could now be considered as risk-free.
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