Dutch Insurer Aegon Replaces Generali on 'Too Big to Fail' List -- Update
November 03 2015 - 11:13AM
Dow Jones News
By Archie van Riemsdijk
Dutch insurer Aegon NV is now one of the nine insurance
companies that are essential to the stability of the global
financial system, according to the international Financial
Stability Board.
The board, a global committee of financial regulators, said on
Tuesday that Aegon has replaced Italian rival Assicurazioni
Generali SpA on the list of insurers that are considered "too big
to fail".
The move comes as many international banks and insurers face
more stringent regulation as policy makers strive to shore up the
global financial system from possible shocks of the sort that
followed the collapse of Lehman Brothers seven years ago.
Designating Aegon as one of the so-called global systemically
important insurers, or G-SIIs, may require the group to bolster its
finances to meet more onerous regulatory requirements. Aegon earns
most of its income through its U.S. subsidiary Transamerica.
A higher loss-absorbency requirement for will be implemented for
the nine insurers in 2019, according to the FSB, which is based in
Basel, Switzerland.
Aegon spokeswoman Debora De Laaf said the implications of the
designation for the Dutch company are not yet clear. "It is too
early to say anything", Ms. De Laaf said.
Aegon had received the FSB news release on Tuesday morning, Ms.
De Laaf said, when asked whether the company was surprised by the
decision. "It is a designation process that takes place annually,"
she said.
Aegon could still hope to drop off the list again in coming
years, as a result of a new methodology that is currently under
review.
A higher capital requirement will be applied as of 2019 to those
nine G-SII's that will be included on the list in November 2017,
the FSB stated.
This will include an uplift of basic capital requirements by
33%, for all activities other than banking, the agency that
develops the new standard, the International Association of
Insurance Supervisors, or IAIS, announced last month.
Analyst Marcell Houben at Dutch broker SNS Securities said total
capital requirements for G-SII's could rise by an average 10% in
future industry standards. He recently raised his rating on Aegon
to buy, on valuation grounds.
The inclusion of Aegon and the exclusion of Generali in the list
of nine G-SII's for 2015 reflect changes in the level or type of
activity undertaken by the two insurance companies, combined with
supervisory judgment, the FSB said.
"We see this as an entirely logical decision given the
significant transformation of the Group over the past few years
including a refocus on our core insurance business and
strengthening of our balance sheet," said a Generali spokesman.
This is "excellent" news as those on that list need an
additional capital buffer, said Matteo Ghilotti, an analyst at
Milan-based Equita SIM, adding Generali was probably removed from
the list as a result of the sale of the BSI unit. He has a hold
rating on the insurer.
According to the FSB, the Dutch insurance company will require
enhanced group-wide supervision. Aegon operates mainly in the
Netherlands, the U.S., and U.K., though it has some activities
elsewhere in Europe and in Asia.
A group-wide supervisor will be assigned to Aegon, with direct
powers over its holding companies and overseeing systemic risk and
liquidity planning, the FSB said. Aegon will need to set up a
resolution plan to enable the supervisor to wind up the company if
it gets into trouble in a future financial crisis.
Aegon said it would comply with the FSB's requirements and take
part in the debate on the definition of G-SII's.
Liam Moloney contributed to this article.
Write to Archie van Riemsdijk at archie.vanriemsdijk@wsj.com
Subscribe to WSJ: http://online.wsj.com?mod=djnwires
(END) Dow Jones Newswires
November 03, 2015 10:58 ET (15:58 GMT)
Copyright (c) 2015 Dow Jones & Company, Inc.
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