Cap 'too high' on Solvency II credit risk adjustment
European Commission proposals on the credit risk adjustment will fail to prevent balance sheet volatility, say experts
A proposed 35-basis point cap on the Solvency II credit risk adjustment is set too high to prevent volatility in insurers' balance sheets, actuaries warn, saying the limit will only take effect in times of severe market stress.
The cap is part of an overhaul by the European Commission of how the adjustment is calculated, according to sources familiar with a draft version of the delegated acts sent to member states last week.
The commission also proposes to halve the size of the adjustment and
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