Sunday 1st February 2015
NEWS TICKER FRIDAY, JANUARY 30TH: Morningstar has moved the Morningstar Analyst Rating™ of the Fidelity Japan fund to Neutral. The fund was previously Under Review due to a change in management. Prior to being placed Under Review, the fund was rated Neutral. Management of the fund has passed to Hiroyuki Ito - a proven Japanese equity manager, says Morningstar. Ito recently joined Fidelity from Goldman Sachs, where he successfully ran a Japanese equity fund which was positively rated by Morningstar. “At Fidelity, the manager is backed by a large and reasonably experienced analyst team, who enjoy excellent access to senior company management. While we value Mr Ito’s long experience, we are mindful that he may need some further time to establish effective working relationships with the large team of analysts and develop a suitable way of utilising this valuable resource,” says the Morningstar release - The Federal Deposit Insurance Corporation (FDIC) today released a list of orders of administrative enforcement actions taken against banks and individuals in December. No administrative hearings are scheduled for February 2015. The FDIC issued a total of 53 orders and one notice. The orders included: five consent orders; 13 removal and prohibition orders; 11 section 19 orders; 15 civil money penalty; nine orders terminating consent orders and cease and desist orders; and one notice. More details are available on its website - Moody's Investors Service has completed a performance review of the UK non-conforming Residential Mortgage Backed Securities (RMBS) portfolio. The review shows that the performance of the portfolio has improved as a result of domestic recovery, increasing house prices and continued low interest-rates. Post-2009, the low interest rate environment has benefitted non-conforming borrowers, a market segment resilient to the moderate interest rate rise. Moody's also notes that UK non-conforming RMBS exposure to interest-only (IO) loans has recently diminished as the majority of such loans repaid or refinanced ahead of their maturity date - The London office of Deutsche Bank is being investigated by the Financial Conduct Authority (FCA), according to The Times newspaper. Allegedly, the bank has been placed under ‘enhanced supervision’ by the FCA amid concerns about governance and regulatory controls at the bank. The enhanced supervision order was taken out some months ago, says the report, however it has only just been made public - According to Reuters, London Stock Exchange Group will put Russell Investments on the block next month, after purchasing it last year. LSE reportedly wants $1.4bn - Legg Mason, Inc. has reported net income of $77m for Q3 fiscal 2014, compared with $4.9m in the previous quarter, and net income of $81.7m over the period. In the prior quarter, Legg Mason completed a debt refinancing that resulted in a $107.1m pre-tax charge. Adjusted income for Q3 fiscal was $113.1m compared to $40.6m in the previous quarter and $124.6m in Q3 fiscal. For the current quarter, operating revenues were $719.0m, up 2% from $703.9m in the prior quarter, and were relatively flat compared to $720.1m in Q3 fiscal. Operating expenses were $599.6m, up 5% from $573.5m in the prior quarter, and were relatively flat compared to $598.4min Q3 of fiscal 2014. Assets under management were $709.1bn as the end of December, up 4% from $679.5bn as of December 31, 2013. The Legg Mason board of directors says it has approved a new share repurchase authorisation for up to $1bn of common stock and declared a quarterly cash dividend on its common stock in the amount of $0.16 per share. - The EUR faces a couple of major releases today, says Clear Treasury LLP, and while the single currency has traded higher through the week, the prospect of €60bn per month in QE will likely keep the euro at a low ebb. The bigger picture hasn’t changed, yesterday’s run of German data was worse than expected with year on year inflation declining to -.5% (EU harmonised level). Despite the weak reading the EUR was unperturbed - The Singapore Exchange (SGX) is providing more information to companies and investors in a new comprehensive disclosure guide. Companies wanting clarity on specific principles and guidelines on corporate governance can look to the guide, which has been laid out in a question-and-answer format. SGX said listed companies are encouraged to include the new disclosure guide in their annual reports and comply with the 2012 Code of Corporate Governance, and will have to explain any deviations in their reporting collateral. - Cordea Savills on behalf of its European Commercial Fund has sold Camomile Court, 23 Camomile Street, London for £47.97mto a French pension fund, which has entrusted a real estate mandate to AXA Real Estate. The European Commercial Fund completed its initial investment phase in 2014 at total investment volume of more than €750m invested in 20 properties. Active Asset Management in order to secure a stable distribution of circa 5% a year. which has been achieved since inception of the fund is the main focus of the Fund Management now. Gerhard Lehner, head of portfolio management, Germany, at Cordea Savills says “With the sale of this property the fund is realising a value gain of more than 40%. This is the fruit of active Asset Management but does also anticipate future rental growth perspectives. For the reinvestment of the returned equity we have already identified suitable core office properties.” Meantime, Kiran Patel, chief investment officer at Cordea Savills adds: “The sale of Camomile Court adds to the £370m portfolio disposal early in the year. Together with a number of other asset sales, our total UK transaction activity since January stands at £450m. At this stage of the cycle, we believe there is merit in banking performance and taking advantage of some of the strong demand for assets in the market.” - US bourses closed higher last night thanks to much stronger Jobless Claims data (14yr low) which outweighed mixed earnings results. Overnight, Asian bourses taken positive lead from US, even as Bank of Japan data shows that inflation is still falling, consumption in shrinking and manufacturing output is just under expectations. According to Michael van Dulken at Accendo Markets, “Japan’s Nikkei [has been] helped by existing stimulus and weaker JPY. In Australia, the ASX higher as the AUD weakened following producer price inflation adding to expectations of an interest rate cut by the RBA, following other central banks recently reacting to low inflation. Chinese shares down again ahead of a manufacturing report.” - Natixis has just announced the closing of the debt financing for Seabras-1, a new subsea fiber optic cable system between the commercial and financial centers of Brazil and the United States. The global amount of debt at approximately $270m was provided on a fully-underwritten basis by Natixis -

CBI comments on Barnier speech on Solvency II and infrastructure investment

Friday, 01 June 2012
CBI comments on Barnier speech on Solvency II and infrastructure investment “It’s good to hear Commissioner Barnier recognising the important role insurers have to play as long-term investors in infrastructure. The insurance sector will be critical to funding much-needed upgrades to our infrastructure both in the UK and across Europe, says Rhian Kelly, CBI Director for Business Environment policy, adding: “The European Commission must ensure that it makes commercial sense for insurers to invest in infrastructure, including BBB grade assets.” The full speech by Commissioner Barnier at the Insurance Europe Conference in Amsterdam,  covers reforms to the insurance industry, is reproduced below. http://www.ftseglobalmarkets.com/

“It’s good to hear Commissioner Barnier recognising the important role insurers have to play as long-term investors in infrastructure. The insurance sector will be critical to funding much-needed upgrades to our infrastructure both in the UK and across Europe," says Rhian Kelly, CBI Director for Business Environment policy, adding: “The European Commission must ensure that it makes commercial sense for insurers to invest in infrastructure, including BBB grade assets.” The full speech by Commissioner Barnier at the Insurance Europe Conference in Amsterdam,  covers reforms to the insurance industry, is reproduced below.

You know that my roadmap is the same as that of the G20. In a few weeks’ time we will have put forward some 30 texts covering the whole range of decisions taken by the G20 in response to the crisis.

Europe has shown it is determined to restore stability in its financial system. It must now prove its willingness to put its real economy back on the path of sustainable growth. This should be our priority for the coming months.

I am convinced that, since insurers are a force for stability and continuity on financial markets, and especially as they can invest for the long term, they have a key role to play in getting Europe back on track for sustainable growth.

I am also certain that the three major regulatory projects under way can help them in that role.

First and foremost I am thinking of Solvency II, which is an effective supervisory system. At the end of 2010, insurers had invested more than 7,400 billion euro worth of assets, which is more than 50% of European GDP. It is in the interest of Europe and of policy holders for those assets to be allocated optimally in order to finance sustainable growth.

Similarly, I think a modernised pension fund supervisory regime should allow funding to be channelled properly towards the real economy without undermining the protection of current and future pensioners. These are the stakes in the revision of the IORP Directive (institutions for occupational retirement provision).

Lastly, the financial system will not contribute fully to sustainable growth in the real economy until confidence is restored among its ‘users’. This is the aim of the initiatives we will be proposing for the protection of investors and consumers of financial services. In particular, the revision of the insurance mediation Directive (IMD) comes to mind.

Allow me to elaborate on the three projects I mentioned.

I – Solvency II

As you know, our aim with Solvency II is to introduce for all European insurers and reinsurers an efficient, modern, economic solvency system based on real risks. While it is true that this system was designed in very different economic circumstances from those we have seen in recent years, I think the Framework Directive adopted in 2009 is sufficiently flexible to allow all the changes necessary to take account of the current state of the economy.

These changes are important because the Solvency II regime should allow insurers to fully play their part in the return to sustainable growth in Europe.

Which steps have we taken under Solvency II to recognise the role of insurers as long-term investors?

I would mention three points:

·                     Firstly, a reminder that the framework set out in the Directive was not designed to prevent insurers investing in certain categories of assets. On the contrary, they will have greater freedom to invest since the absolute limits by category of asset currently in force will cease to exist. In addition, the capital requirements will be reduced for insurers who diversify their asset portfolio.

·                     Next, Solvability II recognises that it is better for insurers offering policies with long-term guarantees to invest for the long term rather than the short term. For example, it seems logical for an insurer offering pension policies with guarantees lasting several decades to invest in very long maturity bonds. In such a case, the capital burden under Solvency II would be lower than if the insurer invested in short-term bonds. A very long-term investment of this kind could be used, for example, to fund infrastructure projects and thereby create growth. Thus, Solvency II allows asset-liability management, which is inherent to the insurance profession, to benefit the real economy.

·                     To strengthen insurers’ impact on sustainable growth in the real economy, it is therefore important to foster their ability to provide long-term guarantees. That is what we have been doing over the last few months in close cooperation with the insurance industry and governments in Europe. This has enabled us to come up with a set of solutions that take account of the concerns of several Member States. The discussions on the Omnibus II Directive now include these aspects and I hope the European Parliament, whose role is essential in this matter, will soon reach a balanced agreement with the Council on the issue of long-term guarantees. We are doing our utmost to ensure that the agreement contains various well-tailored solutions to address the concerns expressed by the insurance sector and to avoid certain markets or insurers being penalised by the new system. At the same time, we wish to see swift progress in the discussions as we need to stick to the timetable we have set ourselves.

While we are on the subject of the timetable, I would like to stress one point: in the Commission’s view it is important for Solvency II to enter into force as soon as possible. We have been working on this project with the industry for more than 10 years now.

What are we doing to ensure Solvency II applies from 1 January 2014?

Although our proposal for the Omnibus II Directive was published at the very beginning of 2011, Parliament only took a position on the text at the beginning of spring 2012. This meant that the discussions between Parliament and the Council started quite late. Rapid progress has been made though and I am hopeful that a political agreement will be reached over the coming weeks. However, if nothing happens, there is a major risk that the Solvency II Directive will not be officially amended in time, that is before 1 November 2012.

That is why on 16 May 2012 we made a very targeted proposal to amend Solvency II on this point alone, in other words to change the date of implementation by the Member States. Parliament and the Council should, therefore, decide very shortly that Solvency II will apply from 1 January 2014.

Once the Omnibus II Directive has been adopted, the system will be ready to be put in place very quickly and the Commission will then be able to table the implementing texts (‘Level 2’) completing the Framework Directive. Similarly, the European Insurance and Occupational Pensions Authority (EIOPA) will be able to submit its draft technical standards to the Commission.

II – Directive on institutions for occupational retirement provision (IORPs)

I am aware that the planned revision of the Directive on institutions for occupational retirement provision, also known as the ‘IORP Directive’ or the ‘pension funds Directive’, has given rise to a great deal of concern here in the Netherlands and in other Member States such as Germany and the United Kingdom. The argument I often hear is that pension funds in general have withstood the crisis well so there is no need to amend the existing rules.

However, I would like to insist on the need for this revision. We cannot allow ourselves to look only at the current situation. We also have to take into account the safety of future pensioners and their trust in the system! If we do not start the necessary reforms today, there will be no guarantee that the occupational pensions paid out in 10 or 20 or 30 years will be adequate. This is a matter of our common responsibility towards future generations.

But let me be very clear: contrary to reports in the press and as I have already said on several occasions – including at our Brussels conference on 1 March – we do not intend to apply all the Solvency II rules to occupational pensions institutions.

Nevertheless, European regulation of insurance companies is important for pension funds because of the legal link between the two. The pension funds Directive dating from 2003 currently refers to the applicable insurance legislation – namely, the Solvency I directives! The transition to Solvency II for insurers therefore raises the following question: how can pension funds also be made to benefit from more effective regulation that is better adapted to today’s challenges?

I believe it is important in regulatory terms to maintain a level playing field between insurance companies and pension funds when they supply similar and interchangeable products. I do not wish to penalise either of them.

We must remember that an occupational pension scheme is not an insurance policy. However, in so far as the risks underwritten by an insurance company or a pension fund are the same, I think the prudential rules should also be the same. This is necessary so as not to promote regulatory arbitrage in the single market.

I would stress though that we have not yet spelled out the new rules for pension funds. No final decision has yet been taken on this matter. The preparatory work is under way. Over the coming months, the Commission will continue to work closely with EIOPA – and I welcome Gabriel Bernardino, who is with us here this morning – and all the other stakeholders to ensure that the final text hits the right note. The Commission is mindful of the big differences between the pension systems currently in place in Member States. Those differences must be taken into account in our revision.

Given the complexity and importance of this issue, and particularly the need for first-rate quantitative impact assessments, I have decided to take a few more months to finalise the revision. We therefore expect to table the revised Directive before summer 2013, rather than at the end of 2012.

Ladies and Gentlemen,

Although the current discussions on pensions are largely focused on pension funds, in my view insurance companies also have a key role to play in this area. The work on insurance products with long-term guarantees under Solvency II that I mentioned before is heading in the same direction. As I explained, this work will have a profound impact on the ability of insurers to invest for the long term. The same would also apply to pension funds if a similar approach is chosen.

More generally, we will shortly be launching a green paper on this key issue of long-term investment. In this regard, I would like to examine the impact of our proposals, especially Capital Requirements Directive IV (CRD IV) and the Solvency II Directive. I will also seek new ways of encouraging this long-term investment, which is particularly essential for funding major infrastructure projects and the environmental transition.

III – Insurance mediation Directive (IMD)

As I have pointed out, to make the financial system fully serve the real economy, another crucial priority is the protection of investors and consumers of financial services.

In this regard, we shall be proposing three key initiatives in the coming weeks:

Firstly, we want to better protect consumers of packaged retail investment products (PRIPS) by introducing harmonised and transparent information requirements. These products are now so complex and obscure that too often consumers buy them when it is not in their interest to do so. In this context, I can assure you that the rules to be applied will take account of the specific nature of the insurance sector.

Secondly, the Madoff fraud case in the United States, in which some Europeans lost money, has exposed the loopholes in regulating UCITS. Our aim is to provide better protection for those investing in such products by introducing stricter liability rules for the loss of financial instruments kept in a depositary bank.

Finally, a subject that concerns you directly: we want to protect consumers of insurance products, especially by creating a ‘level playing field’ between the different providers of these products. That is why the IMD Directive must include within its scope direct selling of insurance. We think that each policy holder should be given the same level of information and protection, wherever they purchase their insurance guarantee. I will be submitting a text to Parliament and the Council that represents real progress in terms of transparency, including on remuneration, responsible risk management and removing conflicts of interest.

As regards restoring consumer confidence, I also have in mind the confidence insurers inspire when they work together to reduce the risk or limit the impact of the catastrophic consequences that can result from natural or industrial disasters. I intend to publish a green paper open to public consultation on the subject of insurance and disasters. It will be designed as a forum for the exchange of experience and good practice in the Member States. The role of insurers will be acknowledged and discussed and I would invite you all to take part in this very important debate.

Ladies and Gentlemen,

Insurers and reinsurers are guardians of stability and continuity on the financial markets. In the current context, they are more important than ever.

In this regard, we must restore confidence in the ability of the financial system to channel funding towards the real economy over the long term while protecting investors and consumers.

By moving in this direction, our proposals on Solvency II, insurance intermediaries and occupational pensions institutions give us an opportunity to help put the European economy back on the path towards sustainable growth.

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