BNY Mellon and Insurance Risk:
Collateral Management Survey 2014

November 2014

Survey Reveals Fewer Firms Convinced They Hold Enough Assets of Suitable Quality

Insurance Risk’s third collateral management survey in conjunction with BNY Mellon reveals how insurers are grappling with the challenge of central clearing for over-the-counter derivatives.

Brought into effect by parts of the Dodd-Frank legislation in the United States and by the European Market Infrastructure Regulation (EMIR) in Europe, the new regime promises a fundamental readjustment of practice in the area of collateral management. Now, for most trades, firms will clear through a central counterparty and will have to post both initial and variation margin, with the former being cash or sovereign bonds and the latter cash only.

The survey, conducted by Insurance Risk magazine, found that:

  • A growing number of insurers are posting initial and variation margin on OTC derivatives positions as U.S. Dodd-Frank rules take effect and firms elsewhere follow the trend towards more frequent posting of higher quality collateral
  • The number of firms claiming to understand the implications of the move to central clearing has fallen with Europeans trailing behind their North American counterparts
  • Confidence remains low among insurers that they hold enough assets of sufficient quality to meet collateral obligations
  • More firms this year see opportunities to generate income arising from the OTC derivatives reforms, but a still larger group take the opposite view

One-hundred and eleven insurers participated in the survey, representing a sample with more than $9.88 trillion of assets, compared with $7.45 trillion last year.

To learn more, download the Collateral Management Survey 2014. 

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