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Slow Solvency II implementation opens up German fund management

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Delays to the implementation of Solvency II in Germany caused by questions over detailed look-through data are creating opportunities for international asset managers to take slice of the country’s insurance investment business.

According to a straw poll of German fund managers by look-through data specialist Silverfinch, ongoing delays in Solvency II reporting are opening up the country’s EUR1.4 trillion of insurance assets to non-German asset managers unaffected by the problems.

Specifically, Germany has embraced the tripartite data exchange table template (TPT) used for reporting to the regulator on Solvency II look-through data, but a lack of clarity about the way in which some data should be presented is creating delays. As an interim measure, Germany’s Federal Financial Supervisory Authority (BaFin) has allowed insurers to leave gaps in their TPT submissions if they are uncertain of how to present the data.

John Dowdall, managing director of Silverfinch, says: “We’ve said for some time that any country-specific hiccups in the implementation of Solvency II could create opportunities for fund managers to enter new markets.

“Solvency II creates a huge regulatory burden for insurers. Faced with a choice of two asset managers – one Solvency II-friendly, one struggling with its implementation – it’s highly likely an insurer will select the former as their investment partner. At the national level, if country A has implemented Solvency II but county B is still struggling, fund managers from country A have a clear advantage and may well be able to make inroads into the slower country.

“If international firms have a good understanding of local German regulation such as VAG and GroMiKV and have the ability to help their clients address it, they are in a strong position in the German market right now.”

Increased competition is arguably in the interests of European insurers. It provides a larger range of available funds offering the potential to reduce investment costs and manage their liabilities more closely.

Under Solvency II legislation, which took effect from 1 January 2016, European insurers must provide highly granular look-through data to their national regulator each month on all of their invested assets.

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