On the role of the liquidity premium in the regulation of insurers

Prepared by Christian Laux, Vienna University of Economics and Business & Center for Financial Studies (CFS) for the “Workshop on Liquidity Premium in Solvency II: Conceptual and Measurement Issues,” DNB Amsterdam, March
Prepared by Christian Laux, Vienna University of Economics and Business & Center for Financial Studies (CFS) for the “Workshop on Liquidity Premium in Solvency II: Conceptual and Measurement Issues,” DNB Amsterdam, March 18, 2011. The insurance industry and the Committee of European Insurance and Occupational Pension Supervisors (CEIOPS) propose to add a liquidity premium to the risk-free rate when discounting liabilities in times of financial turmoil. The objective is to counterbalance adverse effects on regulatory capital due to a decrease in asset values caused by illiquidity in a crisis. As I argue in this note, although the motive might be sensible, the proposal to add a liquidity premium when discounting liabilities is not the right approach to tackle the problem.
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Metadaten
Author:Christian Laux
URN:urn:nbn:de:hebis:30-101954
Series (Serial Number):White paper / Center for Financial Studies (7)
Document Type:Working Paper
Language:English
Date of Publication (online):2011/04/29
Year of first Publication:2011
Publishing Institution:Univ.-Bibliothek Frankfurt am Main
Release Date:2011/04/29
HeBIS PPN:246150009
Institutes:Center for Financial Studies (CFS)
Dewey Decimal Classification:330 Wirtschaft
Sammlungen:Universitätspublikationen
Licence (German):License Logo Veröffentlichungsvertrag für Publikationen

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