Underlying this debate is the suspicion that if some insurers apply a market consistent valuation approach to the back book of existing guarantees in current market conditions then this will lead to severe strains on solvency levels. It is important that a sensible solution be found to this issue if we are to get Solvency II concluded.
Issuance of ABS backed by assets such as auto loans and trade receivables, with their shorter maturity and more predictable cash flow profiles, has quickly returned to (and exceeded) pre-crisis levels (Graph 4).