Crisis prompts EU insurer fair value rule review
FRANKFURT (Reuters) - European Union regulators are ready to review rules on how insurers and pension funds value their investments given ructions on financial markets, a watchdog agency said on Friday.
The Committee of European Insurance and Occupational Pensions Supervisors (CEIOPS) said in a statement that market turbulence had had only limited impact on Europe's insurers and pension funds, and that the European system is "robust."
It reminded national supervisors and industry players about the scope of the IAS 39 accounting rules, which require the use of market prices for equities but also provide guidance on using assumptions to measure fair value when relevant market evidence does not exist.
"We should not change the principles, but we should be ready to revisit the concept of active markets, where markets obviously do not provide appropriate prices," said CEIOPS Chairman Thomas Steffen, who is also in charge of insurance supervision at German financial watchdog BaFin.
Europe's insurers and pension funds are major investors in equities, CEIOPS noted.
"That is why it is important to avoid overreactions by the industry in the current and fluid circumstances," it said.
Industry players are expected to make further writedowns on their equity investments as the global plunge in share markets accelerates. They have already seen their shares slump over the last year as the crisis spread.
Shares in Europe's biggest insurer Allianz have fallen nearly 60 percent from a year ago, while French rival AXA is down by nearly half and Italy's Generali has declined almost 40 percent.
Commenting on the demise of Yamato Life Insurance Co, an unlisted Japanese midsized insurer that collapsed with $2.7 billion in debt on Friday, CEIOPS said there was "no similar failure foreseen in Europe."
Yamato Life was the first Japanese financial institution to collapse due to global market turmoil.
European supervisors were continuing to monitor developments in their home markets and were also sharing information across borders, CEIOPS said, adding that it stood ready to coordinate supervisory actions to be taken in Europe.
(Reporting by Jonathan Gould)
