AEG Aegon Ltd

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

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(END) Dow Jones Newswires

November 03, 2015 10:58 ET (15:58 GMT)

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