12 January 2018
Zurich
Reporter: Jenna Lomax

Securities lending invaluable to insurers, says Swiss Re director


“The securities financing transactions (SFTs) market benefits from insurers and insurers benefit from the SFT market”, according to Richard Hochreutiner director of head of global collateral at the Swiss Re Group.

Contributing to the International Capital Market Association’s (ICMA) first quarter report of 2018, Hochreutiner added that “insurers are watching the developments in the SFT market closely, and strongly welcome all efforts that benefit market depth, collateral fluidity and liquidity”.

In the report, Hochreutiner quoted an International Securities Lending Association (ISLA) survey that found between 5 percent and 6 percent of the global market for SFTs is estimated to be attributable to the insurance industry.

He said that percentage included securities lending and repos, but claimed the actual participation may be even higher. In the report, Hochreutiner concentrated on risk reduction, yield enhancement, and collateral.

Hochreutiner said: “Using collateral transformation transactions allows insurers to convert securities. SFTs – in this case securities lending and borrowing – are a highly efficient way to temporarily convert securities into other securities, without incurring significant changes in asset allocation and the related transaction costs.”

Though he warned: “Should the SFT market no longer allow for efficient collateral transformation, insurers would be forced to adapt the way they invest [...] the impact of which will be a reduced return on investment for client and insurer alike.”

Hochreutiner also said that yield, especially yield generated at marginal additional risk, is “particularly welcome on saving products with their long-term investment horizon.”

He claimed that insurers in particular appreciate and abide by the legal frameworks in terms of securities lending and borrowing transactions, which is outlined in ISLA’s Global Master Securities Lending Agreement.

More news
The latest news from Securities Lending Times
Join Our Newsletter

Sign up today and never
miss the latest news or an issue again

Subscribe now
IHS Markit names Stuart Cornock as associate sales director
22 January 2018 | London | Reporter: Zsuzsa Szabo
Cornock has moved from Clearstream to IHS Markit
New York Fed confirms repo rate complaints
22 January 2018 | New York | Reporter: Zsuzsa Szabo
An audit of the Federal Reserve Bank of New York uncovered that the effective federal funds rate and overnight bank funding rate are in compliance with principles for financial benchmarks
James Burron has left AIMA
22 January 2018 | Toronto | Reporter: Jenna Lomax
James Burron has left the Alternative Investment Management Association
Hong Kong securities and derivatives markets break records in 2017
19 January 2018 | Hong Kong | Reporter: Jenna Lomax
Market capitalisation of Hong Kong’s securities market reached over $33 billion, while in the derivatives market total options trading reached over 137 thousand contracts
ESMA updates MiFID II transparency calculations
19 January 2018 | Paris | Reporter: Zsuzsa Szabo
ESMA has revised its transitional transparency calculations for equity and bond instruments reported under MiFID II
S&P reaffirms OCC’s AA+ rating
19 January 2018 | Chicago | Reporter: Jenna Lomax
S&P has reaffirmed OCC’s financial strength rating of “AA+/stable”
Clearstream to include Kazakh government bonds
19 January 2018 | Astana | Reporter: Zsuzsa Szabo
Kazakhstan treasury bonds are to be available through Clearstream