Solvency II to increase FX hedging
Solvency II could cause rise in foreign exchange hedging programmes by insurers
The current format of the Solvency II directive will cause in firms based in countries with shallow domestic bond markets to ramp up their foreign exchange hedging programmes, according to Lars Oswald Dahl, head of risk management at Storebrand, the largest insurer in the Nordic region.
The Solvency II directive is likely to be implemented by 2013 and it will force insurers to mark their assets and liabilities to market. Typically life insurers' liabilities have a duration of more than 30 years
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