A liquid market – banks tap insurers' liquidity reserves

Investment banks’ need for liquidity in a low interest rate environment combined with insurers’ need for higher yields has seen the concept of liquidity lending between the two sectors pushed to the limit. On the surface this appears to be a major opportunity for the insurance sector – but are there dangers lurking beneath the surface? Aaron Woolner reports

The existence of a liquidity premium has only recently been recognised by European insurance regulators, yet it seems that investment banks have been far quicker to accept its existence. "To us it appears that every bank on The Street is calling around looking to lock in liquidity," says Rich Hochreutiner, head of global collateral management for Swiss Re's treasury department. He declines to say whether the Zurich-based group has taken up any of these proposals, but admits the firm is