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Insurers may look to alternative asset classes, such as private equity and hedge funds, as Solvency II gets closer, according to a report. This is among the key findings of a new survey conducted by the Economist Intelligence Unit, on behalf of Blackrock, examining the impact of Solvency II on the asset allocation and investment strategy of insurers with operations in Europe.
The research is based on a survey, which was conducted in October and November 2011, of over 220 respondents from insurers in 18 countries, as well as eight in-depth interviews with insurers, regulators and trade bodies. As a result, insurers have indicated that they may move away from government bonds and equities and increase their exposure to alternative assets. Specifically, almost a third (32 per cent) expect to increase their allocations to private equity and hedge funds, despite the potentially higher capital charges they might face under Solvency II.
It also found that meeting Solvency II's data reporting requirements is a major concern. While a vast majority (97 per cent) of survey respondents are confident in their own investment governance and risk management capabilities, over 90 per cent are 'very' or 'somewhat' concerned about meeting the requirements for timeliness (95 per cent) and completeness (94 per cent) of data under Solvency II. The vast majority are anxious about the quality of data from third parties (92 per cent).