Insurers will gradually reduce their exposure to the equities market in proportion to their overall investments, unless there is a significant increase in their capital, according to Mr Othman El Alamy, secretary general of the Insurance Supervisory and Social Security Authority (ACAPS), and Mr Bachir Baddou, director general of the Moroccan Federation of Insurance and Reinsurance Companies (FMSAR).
Solvency II prudential rules are pushing them to limit their participation in this segment of the capital market, reported Medias24.
The new solvency regime, based on risks (counterparty, market, rate, operational, etc), requires insurers to build up significant capital in relation to their stock market investments. Currently, insurers in the country invest an average 45% of their portfolios in shares.
Thus, the new solvency rules will result in either a significant beefing up of insurers’ capital or their partial withdrawal from the stock market.
However, arguing for more participation in the bourses, finance professionals point out the capital market, especially that of listed shares, relies heavily on the involvement of all stakeholders for its success.
Speaking at a stock exchange conference, both Mr El Alamy and Mr Baddou stated that the adoption of the Solvency II rules will be carried out progressively, in consultation between ACAPS and insurers.
The solvency benchmark is being revised internationally, in the direction of easing requirements, under pressure from global insurers affected by restrictions on equity investment. They said the gradual reduction in the exposure of insurers to the stock market, in proportion to their portfolios, will be offset by an increase in other business activity brought about by new mandatory coverages, namely, all construction risks, decennial liability and multi-risk home insurance. M