FRANKFURT, Oct 7 (Reuters)—Europe's insurers look strong enough to handle a Greek default should it occur, the chairman of EU insurance watchdog EIOPA told a German newspaper.
“Some insurers already wrote down their Greek exposure to market value when they published their first-half results,” Gabriel Bernardino told Boersen-Zeitung in an interview.
“I have no information that would indicate to me that a total default would not be digestible,” said Bernardino, who is head of the European Insurance and Occupational Pensions Authority (EIOPA).
However, there were some concentration risks, with Greek insurers holding more domestic government bonds, just as German insurers do in Germany, he said.
Big insurers like Allianz , Axa and Generali wrote 40-50 percent off the value of their Greek government bond holdings in the first half.
Other insurers like Munich Re have been shifting their exposure away from government bonds toward corporate and covered bonds, while staying overweight in German bunds.
Bernardino said there were no easy solutions to the challenge of low interest rates on fixed-income assets, which Bernardino said was creating “considerable” reinvestment risk for insurers. EIOPA is currently studying the problem.
“We want to know where the weak points are,” he said, adding that he expected to publish the results of the study later this year.
EIOPA was also trying to learn from the experience of Japanese insurers, who have been battling the effects of low interest rates for years.
International banking regulators are preparing a surcharge on capital adequacy requirements for around 28 banks seen as crucial to the global financial system, dubbed Systemically Important Financial Institutions or SIFIs, but Bernardino advised against any hasty move to do the same for insurers.
Banks pose mainly liquidity risks, a problem that insurers do not face, Bernardino said. There was also no worldwide set of rules for insurers, with the approach to capital buffers completely different on each side of the Atlantic, for example.
“Burdening insurance SIFIs now with surcharges would only widen these differences,” Bernardino said.
(Reporting by Jonathan Gould; Editing by Greg Mahlich)
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