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New BNY Mellon-sponsored Survey Of Insurers Highlights Lack Of Readiness For Cleared Over-the-counter (OTC) Environment

LONDON, Dec. 3, 2012 /PRNewswire/ -- New research by BNY Mellon, the global leader in investment management and investment services, in association with Insurance Risk magazine and with support from Ernst & Young, has found that nearly half (46%) of those surveyed have either not yet initiated or concluded their impact assessment of the changes mandated by the European Market Infrastructure Regulation (EMIR) and the Dodd-Frank Act – while 22% do not believe they will be impacted at all.

Only 32% of insurers surveyed said they understood the impacts of the new regulations and were already working towards operational readiness.

Other key findings of the survey include:

  • 78% of respondents believe that they will be impacted by upcoming regulatory changes;
  • only 12% of respondents believe they hold enough assets of the requisite quality within their investment portfolios to meet future collateral margining requirements and other pledges;
  • 27% believe that they may be obliged to engage in some sort of "asset transformation" activity before being able to post the appropriate collateral, despite one-third of their bond portfolio investments being rated AA or above;
  • 53% of insurers expect to participate in the new cleared environment;
  • 50% of those surveyed believe their organisation will increase its use of derivatives in the coming years.

The survey polled 59 insurers across the life, non-life and re-insurance sectors; the respondents collectively represent assets in excess of $4.5 trillion, approximately 20% of total insurer owned assets worldwide.

Under the existing regime, 64% of respondents said they hold enough assets of the requisite quality within their investment portfolios to meet their collateral margining requirements and other pledges. Currently 54% do not post initial margin and 25% don't post variation margin.

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