Investment - Articles - Solvency II - AXA IM on it's impact on Bonds and Equities


 The allocation decisions European insurers are making as a result of Solvency II have and will make corporate bonds more expensive and reduce equity returns
  
 In the attached study, Mathieu L’Hoir and Mathilde Sauve from AXA Investment Managers’ Research and Investment Strategy team assess the impact of Solvency II on insurer’s allocation models and on asset prices, using AXA IM’s fund flows model, which estimates the sensitivity of stock market returns, corporate bond spreads and government bond yields to fund flows.
  
 Key Points
 • Solvency II rules result in a significant reallocation of insurers’ portfolios toward sovereigns and credit at the expense of equities.
 • In this study, we assess the impact of the € 500bn in asset flows generated by Solvency II on asset prices in European capital markets.
 • Based on our estimates, this has already reduced investors’ total return on European equities by up to one quarter since 2009 and put a substantial squeeze on corporate spreads (of up to 80bps).
 • Going forward, Solvency II will still be a significant driver of asset prices: it is likely to cost up to one quarter of the expected total return on equities and to bring down spreads another 60bps from current levels.
 • Solvency II, combined with other factors (including low interest rates and Basel III), is contributing to a structural tilt in the market toward debt securities.
  
  
 Please click on the icon below to view the full study
  
 

Back to Index


Similar News to this Story

Inheritance Tax raises almost GBP6 billion in 8 months
December’s update from HMRC shows that Inheritance Tax (IHT) receipts reached £5.7 billion through the first two-thirds of this financial year (April
PIC completes first Mosaic buyin with GCB Pension Fund
Pension Insurance Corporation plc (“PIC”) has concluded its first full scheme buy-in within Mosaic, PIC’s streamlined service for pension schemes with
Airways Pension Scheme complete longevity hedge with MetLife
The Trustees of the Airways Pension Scheme (“the Scheme”), Metropolitan Tower Life Insurance Company, a subsidiary of MetLife, Inc., (“MetLife”) and Z

Site Search

Exact   Any  

Latest Actuarial Jobs

Actuarial Login

Email
Password
 Jobseeker    Client
Reminder Logon

APA Sponsors

Actuarial Jobs & News Feeds

Jobs RSS News RSS

WikiActuary

Be the first to contribute to our definitive actuarial reference forum. Built by actuaries for actuaries.