The Italian government has given Italian insurers some relief from the pressures of the eurozone sovereign debt crisis by easing the rules for the recognition of the full effect of falling government bond prices.
Insurance groups in Italy such as ICMIF member Unipol could benefit from this change as it means that they do not have to take a capital charge for all of the unrealised losses on eurozone government bonds.
The change in the rules took place early in October this year as part of an amendment to the government’s austerity measures and they followed a sharp decline in the prices of Italian Treasuries. The amendment relaxes solvency capital calculations when there are unrealised losses on government bonds. Italian insurance companies hold more than €200bn ($271.5bn) in Italian Treasury bonds, more than 10 per cent of the total outstanding.
Italian insurers including ICMIF member Unipol have all seen gains in their share price since the regulator said the rule change should be finalised.
Specifically, the rule change permits 30 per cent of the solvency capital requirement to be made up by the difference between the market value and the acquisition costs of securities when the unrealised losses are at least 75 per cent of eurozone government bonds. This rises to 40 per cent of the total solvency capital in the case that all of the unrealised losses are in eurozone Treasury bills. The previous limit was 20 per cent.
Unipol Gruppo Finanziario S.p.A. is an Italian company operating principally in the insurance sector in which it is the country’s fourth-largest firm. The company is based in Bologna and it was founded in 1962 as a cooperative provider of non-life insurance products.