It is unlikely that many years from now, you will be telling your grandchildren what you were doing on the 3rd January 2018. But, last Wednesday marked the beginning of a major new set of regulatory financial reforms that will not just affect European financial markets but will have knock-on effects globally.
Many of you will point out that the Markets in Financial Instruments Directive II (MiFID II) does not cover the (re)insurance market. However, the way (re)insurance risks are transferred will be influenced by what is occurring in the capital markets.
Is the (re)insurance industry going to proactively transform itself to meet these challenges or will global regulators prepare for another round of battles to impose change?
In the wake of the financial crisis, the aim of MiFID II is to offer greater protection to investors, restore trust in financial markets and offer greater market transparency.
In order to achieve this, a key part of the directive aims to reduce the amount of Over-the-Counter (OTC) trading and move these trades to electronic venues with greater audit trails. All parts of the value chain must now evidence that the best price was offered, clearly separate and analyse the cost of any research (written reports, discussions with analysts etc) as well as document all trading costs.
This will give investors the data and assurance that brokers are acting in their best interest as well as give them confidence that asset managers are seeking out the best research and using the most cost-effective trading venues.
For the execution of a (re)insurance contract, this level of assurance and transparency may appear light years away but the indirect impact that MiFID II will have on the (re)insurance marketplace cannot be underestimated.
Working with the insurance industry, AkinovA is building an electronic marketplace for the transfer and trading of (re)insurance risks. This will increase transparency, demonstrate best execution of trades and increase trading efficiency. By taking an inclusive approach, AkinovA is bringing together all parts of the (re)insurance value chain to enable this transformation.
We wish everyone a very prosperous start to 2018 and with the January 1st renewals having been wrapped up we look forward to continuing our discussions with as many of you as possible. If you would like to find out more about AkinovA or how you can get involved, please contact Alexander.Pike@AkinovA.com.