EU insurance regulator monitors private credit risks (with Francine Lacqua)

Private equity ownership of EU insurers is only 2.4% of the market, but concentrated in a few member states. Private credit is only 5% of insurer assets, mostly in real estate and mortgages. The regulator is monitoring risks but not currently concerned about systemic issues. AI disruption is being watched for interconnectedness.

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Petra Hielkema 7.0

EU insurance regulator monitors private credit risks (with Francine Lacqua)

yields

The regulator's comments do not suggest any directional move in yields. The focus is on risk management rather than macroeconomic outlook.

Francine Lacqua

Private equity firms are increasingly interested in buying insurers. Why are you wary of such deals?
Petra Hielkema

Ownership by private equity has risen to 27 firms, but that is only 2.4% of the total market (€260 billion). However, in a few member states, private equity ownership is over 10%, which requires more scrutiny.
Francine Lacqua

Does your clarity entice more buyers or scare private equity off?
Petra Hielkema

We are in an exploration phase. Private credit can bring innovation and new capital, which we need. But it must come with a reasonable understanding of new risks: liquidity, credit, opacity, and the need for transparency and clear valuation.
Francine Lacqua

How much is too much private credit for an insurer?
Petra Hielkema

There is no per se limit, but the prudent person principle requires insurers to identify, measure, manage, and report risks. They must also match assets and liabilities, especially in volatile markets.
Francine Lacqua

Do you think there is a sufficient grasp of the risks?
Petra Hielkema

It depends. Credit was bank business. Insurers moving into this need to step up their knowledge and develop proper models. We are monitoring carefully and have published a supervisory statement to guide national supervisors.
Francine Lacqua

Is AI disruption your biggest concern right now?
Petra Hielkema

Currently, only 5% of insurer assets are in private credit, and 80% of that is real estate and mortgages. So no, we do not see that as a major concern today. But we need to be ready for the future.

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