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Insurance Europe

As indicated in Section 1 of the response, the new requirements would create significant operational burden on companies as all contracts in the OTC environment would have to be re-negotiated. Operational burden will be increased by eg introduction of very prescriptive collateral diversification requirements and, potentially, by non-alignment of rules at international level.

These types of cost can be reduced if the final technical standards define high level principles allowing for a practical and workable implementation, avoiding prescriptive rules with unnecessary operational burden and costs.

More details on Insurance Europe’s position can be found in section 1 of the response.
A descriptive approach to collateral diversification creates significant operational burden; (especially) in the case of small insurance companies, with limited exposure on derivatives, such requirements have no economic benefits.

More details on Insurance Europe’s position can be found in section 1 of the response.
No answer.
Insurance Europe believes that any legislation aimed at encouraging development of internal rating based (IRB) models should take into account the nature, scale and complexity of users of credit ratings. No differentiation between IRB and external credit ratings should be made to define assets’ eligibility.

More details on Insurance Europe’s position can be found in section 1 of the response.
Concentration limits would create operational burden in practice. Insurers with large asset portfolios and derivatives activity already have collateral management rules in place for risk management purposes, while insurers with very limited derivatives activity do not have the need, nor the resources to assess collateral from a concentration point of view. While the introduction of thresholds might look like a suitable solution for addressing concentration risk, the calculation and monitoring of thresholds produces disproportionate additional work and burdens for insurers. Where the value of collateral is limited in absolute terms, the risk of collateral liquidity is inexistent and concentration limits are not needed.

More details on Insurance Europe’s position can be found in section 1 of the response.
No answer.
Cristina Mihai
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