Basel III and Solvency II - Risks and Side-Effects from their Interplay

Project Start:04/2013
Status:Completed
Researchers:
Category: Financial Intermediation, Systemic Risk Lab
Funded by:LOEWE

Basel III and Solvency II were developed without taking into consideration their interdependencies and resulting consequences for the economy, although there are substantial cross holdings between banks and insurance companies. So far, it is unclear how mutual dependencies and the different regulatory approaches will affect the risk policies of banks and insurance companies. This research project aims to shed light on the question as to how the different regulatory requirements of Basel III and Solvency II will influence equity endowment and asset allocation in banks and insurance companies, and the refinancing costs of banks. In addition, the project will analyze the resulting optimal safety level and elucidate how interactions of Basel III and Solvency II could contribute to systemic risk; in particular, how it could threaten the supply of insurance and loans.

The project has been concluded with two papers that were published in refereed journals.

 

Related Published Papers

Author/sTitleYearProgram AreaKeywords
Helmut Gründl, Tobias NiedrigThe Effects of Contingent Convertible (CoCo) Bonds on Insurers’ Capital Requirements under Solvency II
The Geneva Papers on Risk and Insurance: Issues and Practice
2015 Financial Intermediation, Systemic Risk Lab Contingent Convertible Capital, CoCo Bond, Basel III, Solvency II, Life Insurance, Interconnectedness
Tobias NiedrigOptimal Asset Allocation for Interconnected Life Insurers in the Low Interest Rate Environment Under Solvency Regulation
Journal of Insurance Issues
2015 Financial Intermediation, Systemic Risk Lab Basel III, Solvency II, Life Insurance, Interest Rate Guarantees, Asset Allocation, Contagion, Interconnectedness

Related Working Papers

No.Author/sTitleYearProgram AreaKeywords
97Tobias NiedrigOptimal Asset Allocation for Interconnected Life Insurers in the Low Interest Rate Environment Under Solvency Regulation2015 Financial Intermediation, Systemic Risk Lab Basel III, Solvency II, Life Insurance, Interest Rate Guarantees, Asset Allocation, Contagion, Interconnectedness
98Helmut Gründl, Tobias NiedrigThe Effects of Contingent Convertible (CoCo) Bonds on Insurers’ Capital Requirements under Solvency II2015 Financial Intermediation, Systemic Risk Lab Contingent Convertible Capital, CoCo Bond, Basel III, Solvency II, Life Insurance, Interconnectedness
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