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The European Insurance and Occupational Pensions Authority (EIOPA) has announced revised Solvency 2 calibrations on capital charges needed by insurers to hold asset-backed securities. EIOPA is now proposing a reduction of the spread-risk charge for AAA-rated securitisations from 7 per cent to 4.3 per cent. This is significant, but not enough to make a difference for insurers investing in securitisation.
However, the Association for Financial Markets in Europe (AFME) welcomes the authority’s introduction of a definition for high-quality securitisation.
Sidika Ulker, a director of the Securitisation division at AFME, said: “AFME strongly supports EIOPA’s work in reviewing the capital charges for securitisation under Solvency II and, for the first time, recognising the importance of high-quality securitisations in the framework. However, we remain concerned that EIOPA’s proposed revisions to the capital charges will not be sufficient to encourage the return of insurance company investors. A revived and renewed high-quality securitisation market, delivering funding for the real economy and with significant participation from non-bank investors such as insurance companies, is critical to help fund Europe’s recovery – particularly in those Member States most affected by the sovereign debt crisis.”