News and Analysis
Solvency II puts CLOs back on the map — but insurers have work to do
- Sam Robinson
- +Michelle D'Souza
•11 min read
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On the face of it, the proposed changes to Solvency II have massive implications for the CLO market. So why haven’t these proposals been met with unequivocal enthusiasm?
The proposed capital charges for EU insurance companies holding CLO (and other non-STS securitisations) triple-A tranches would mean a drop from 12.5% to 2.7%. As previously covered by 9fin 9fin this makes it potentially far easier for insurers to invest in these tranches, and the EU insurance market has literally trillions in assets that are largely absent from the CLO market.
The language frequently cited in the proposal mentions US insurers investing around 12% of their assets in securitisation, compared to less than 1% among EU insurance companies.
“Looking at the overall EU securitisation relaunch — this change in the risk weight for non-STS triple-As is, on paper, the most significant part of the stimulus package,” says Chris McGarry, partner at Mayer Brown.
