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17th of May 2012

Rating could cut Solvency II costs says Fitch

Vicky Beckett 18/01/2012

Obtaining a credit rating on a captive could lower the overall capital costs under Solvency II, Fitch has argued.
 
The ratings agency predicts that for small captives with limited financial strength and expertise, the directive will be too burdensome, resulting in a limited outflow of captives from the EU.
 
Bjorn Norrman, associate director in Fitch's insurance team, said: "According to Fitch's analysis, obtaining a credit rating on an off-shore captive could, under the standard model, significantly lower the counterparty risk capital requirements levied on the fronting entity under Solvency II, and thereby reduce the overall capital requirements on an off-shore structure."
 
As Solvency II is designed to cater for an ‘average’ insurer, EU captives will have to strengthen their risk management and governance, and in some cases additional capital injections may be necessary Fitch argues.
 
The agency has suggested that, as an alternative, captives could be redomiciled to a non-Solvency II jurisdiction and write EU-based business through a fronting entity.

Tags: Bjorn Norrman, Capital, Captive, Credit, Domicile, EU, Fitch, Insurance, Off-shore, Rating, Solvency II

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Post a comment

Priyongky 20/02/2012 10:11pm

about bunyig them and writing the address down as a first step. What is protocol? Are we supposed to write thank you notes for every dinner party? Even super close friends that you see often? Let me know..

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