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Ritchie’s investment plans

You know, pensions should be invested in real assets etc?

Insurance has been touted for years as an industry that could benefit from relaxing the EU rules introduced to make financial institutions safer after the 2008 financial crash. However, ministers and regulators were at loggerheads about proposals to water down Solvency 2 rules.

Industry leaders have said they want to invest more capital in illiquid assets such as wind farms and other infrastructure projects, but their hands have been tied as a result of Solvency 2 restrictions.

Campaigning to relax those solvency rules would not be a grand enough stage for the Grand Tuber of course.

But there’s a corollary to this too. If the insurers, who get to pool risk, can’t do this because solvency, then how is the individual who cannot pool risk going to achieve it in bonds?

Complex area and as we know retired accountants from Wandsworth don’t do complexity.

1 thought on “Ritchie’s investment plans”

  1. Most people who opine on this have no clue. The state wanted insurers like mine to invest more in the UK. We don’t as we can’t trust the PRA not to change the rules, the PRA makes it hard to add new types of asset to the Matching Adjustment Portfolio and then challenges why you’ve assigned a specific rating despite having even less information and expertise than we do.

    The capital reduction proposed isn’t a capital reduction, it’s not implementing a proposal the PRA had to make it even harder than it is now.

    An example…
    Rules say “asset class” = bank and Non-bank debt or sovereign/supranational debt or everything else
    PRA say “asset class” = any arbitrary categorisation that allows them to require an application from an insurer to ban you buying this particular type of instrument

    Naive fools say ‘just challenge the PRA’. Well that tends to go badly as the PRA is judge, jury and executioner. The proposed changed to make the PRA more transparent, to have an independent oversight group (as the Treasury Select Committee is useless at this and Parliament has no clue) and to require a proper cost/benefit analysis of proposed changes is of more importance than tweaks.

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