EU regulation will force insurers to up FX hedging programmes
The Solvency II directive is likely to be implemented by 2013 and will force insurers to mark their assets and liabilities to market. Typically life insurers’ liabilities have a duration of more than 30 years while many EU member state fixed-income markets – the assets typically used to immunise these risks – only have liquidity up to about 10 years.
According to Oslo-based Dahl, this will leave insurers with a choice of running a duration mismatch – a serious risk for a life company – or instead
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