Regulatory Tailwinds: Solvency II and the Insurance Opportunity

The moderator outlines the significance of the Solvency II amendments coming into force on 30 January 2027, which will reduce the risk weight for EU insurers investing in CLO AAAs to approximately one fifth of its current level. Jon Brager confirms that conversations with insurance companies are already underway, with firms preparing to take advantage of the lower capital charge. He draws a sharp contrast with the US market where insurance is already a major CLO buyer, and argues that the regulatory change is a normalisation of post-GFC rules that unfairly penalised securitisations.