Derivatives: an insurer’s perspective

H. De Castries and B. Claveranne

Financial Stability Review, 2010, issue 14, 27-34

Abstract: The business model of insurance companies and their role in the economy and for policy holders make the use of derivatives key instruments to manage their risks. Insurers bear some specifi city compared to other markets’ participants in derivatives markets: their purpose is mostly hedging and, structurally, insurance companies do not take leveraged positions. Derivative instruments are a reality for an insurer like AXA as evidenced by fi gures and processes in place ; and Solvency II will most likely increase derivative hedging. Throughout the crisis, management of derivatives revealed significant improvement needs. But derivatives passed the test. Of course, there is a need for better regulation and insurers’ support many ongoing initiatives. However, OTC contracts play an instrumental role for insurers and their role and importance should be acknowledged.

Date: 2010
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