FSA decision prompts tightening for insurers’ credit spreads

The cost of protection for the European insurance sector has tightened by up to 15bp in trading this week following a decision by UK regulator, the Financial Services Authority (FSA), to ease regulatory solvency requirements for individual life assurers.

Traders said clients were selling protection on insurance companies including Dexia, Axa and Prudential, following the decision late last Friday. Five-year senior protection for benchmark names Allianz and Axa are now both priced at around 85-90bp-mid. They both traded wider than 100bp last week as investors bought-up protection driven by fears of insurers' equity losses.

The subsequent equity rally on Monday kept credit default spreads tight at the start of the week. But as weakness re-entered

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