'Insurers should rethink sovereign debt exposures'

Europe’s top insurance regulator has said insurers and his fellow supervisors may need to rethink the way they deal with their exposures to sovereign debt.  

Government bonds are rated as risk-free in Solvency II, but fears are growing that Greece will default on its debts.

For the first time, in his keynote address at the inaugural conference of the European Insurance and Occupational Pensions Authority (Eiopa), the body’s chairman Gabriel Bernardino acknowledged that the Euro-crisis may force a rethink of his organisation’s stance.

He said: “In the future we need to explore ways to deal more properly with the risks of sovereign exposures and find a suitable way to integrate them in the overall risk based framework.”

Bernardino told the conference that the financial system’s sustainability depends heavily on a robust assessment of underwriting and investment risks.

“This is essentially a responsibility of market participants but the regulatory framework should not give contradictory signals and wrong incentives.”