Italy coronavirus law to offer insurers better volatility adjustment
ROME – Italian insurers will be able to limit the impact of excessive BTP bond volatility on their balance sheets thanks to new EU rules Rome will include in a decree to offset the economic impact of coronavirus, a draft decree seen by Reuters showed.
The decree, due to be approved on Friday, will adopt a new EU directive covering European insurers that reduces the threshold for triggering the volatility adjustment mechanism to 85% from a current 100%.
European insurers are required to book investments in sovereign holdings, such as Italian BTP state bonds, at market value in order to calculate capital and solvency ratios.
Under current rules, volatility adjustment to prevent price fluctuations abnormally impacting such ratios is triggered when the deviation between the BTP yield and the European average of similar securities exceeds 100 basis points.
(Reporting by Stefano Bernabei, editing by Stephen Jewkes)
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