Solvency II: On the Suitability of the Calibration of Private Equity Risk in the Solvency II Standard Formula

This study calls into question the method and the data used by the European regulator to measure the risk of private equity investments, in particular the correlation coefficient of performance of private equity and that of listed equities.

The drawing-up of Solvency II prudential rules has become a matter of major concern for the private equity sector since the current measure for private equity risk, used by the European regulator, is likely to dissuade insurers from investing in this asset class. As an example, in the French market, in 2007, the total investments in private equity represented €22bn in the balance sheet of insurance companies (FFSA 2008). They finance 21% of the funds raised (AFIC); thus becoming the leading national investors in unlisted stocks.

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Solvency II: On the Suitability of the Calibration of Private Equity Risk in t...
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Type: EDHEC Publication
Date: le 19/05/2010
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For more information, please contact Joanne Finlay, EDHEC Research and Development Department [ joanne.finlay@edhec.edu ] The contents of this paper do not necessarily reflect the opinions of EDHEC Business School.

Research Cluster : Financial Analysis and Accounting

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