Relief in store

The precipitous decline in long-term bond and swap rates at the end of 2008 focused attention on how to truly value long-term liabilities. Storebrand says it has come up with a market-consistent solution that, if integrated into Solvency II, would stabilise insurers' balance sheets in tough markets and form the bedrock of an anti-cyclical regulatory system. Aaron Woolner interviews Frederic Ottesen, group finance director, Storebrand

Nordic Risk: You have constructed a new model for valuing long-term liabilities. What made you focus on this topic?

Frederic Ottesen (FO): We started to consider this issue at the end of last year when, for well-known reasons, long-term rates - or at least the screen quotes for these rates - fell by two full percentage points in Sweden. It wasn't just the fall in prices that was shocking; it was the impact that completing trades had on the market.

For example, in Q4 last year, a small trade in