Solvency II is reaching far beyond its European Union origin, placing capital constraints on insurance asset allocation globally just as the low-yielding environment is pushing the boundaries of portfolio diversification.
“There's real momentum built around solvency modernization taking place in multiple countries (outside of the European Union) right now, and the genesis of that is Solvency II,” said David Lomas, managing director an head of the global financial institutions group at BlackRock Inc., New York.
The European Union directive, which will be implemented in 2016, promises to transform the way insurance portfolios are externally managed in two ways, sources say:
- Some insurers are likely to outsource a larger proportion of their assets.
- More outsourced assets likely will be invested in higher-margin strategies such as hedge funds, real estate and infrastructure to seek better risk-adjusted returns.