Regulator: Israeli insurance cos not in danger

Moshe Bareket

"Capital requirements enable the insurance industry to absorb much more severe shocks than we are seeing now."

The Capital Market, Insurance and Savings Authority, headed by Dr. Moshe Bareket, is trying to calm the public because of the steep decline in capital market indices in Israel and worldwide, which has picked up speed since mid-February. The Authority states, "We are monitoring the risk management and behavior of investment concerns at this time, and see no reason for concern that the insurance companies will not meet their obligations."

The Capital Market Authority oversees the insurance companies and other long-term savings management concerns in Israel, including the provident and pension funds owned by the investment houses and other concerns. Bareket says that he met last Thursday with the insurance companies' CEOs and chairpersons, and today with the investment houses' CEOs. "Starting in 2017, the capital requirements for the insurance companies were calculated on the basis of a solvency model that includes extreme scenarios and enables the insurance industry to absorb much more severe shocks than those observed in the capital market in recent weeks."

Bareket criticized the regulations issued by his predecessor for implementing the solvency requirements in Israel. "In recent months, the Authority has been promoting a switch to the solvency regulations on the European format, while at the same time applying the Basel model in the banking system," he said. "These regulations are more suitable for measuring the required capital for insurance companies, as practiced in Europe. Were they already being applied in Israel now, they would have moderated the volatility in the markets."

Bareket was referring mainly to his plan to extend the period given to companies to fully comply with the solvency regulations. This plan will help the insurance companies, particularly Migdal and Clal Insurance, whose share prices have declined precipitously in recent weeks.

Bareket also states that the Capital Market, Insurance and Savings Authority is taking steps "to verify the readiness of the financial system and the Capital Market, Insurance and Savings Authority to deal with the consequences of the coronavirus." The Authority is responsible for the institutions that manage the public's pension savings, amounting to NIS 7 trillion, and other concerns, such as currency service providers (money changers) and credit providers.

According to Bareket, current events in the markets should not cause alarm among the public concerning its long-term savings. "We remind the public to exercise judgment in transactions involving its savings, and after obtaining appropriate advice from authorized parties," he said.

"The system is prepared for regular payment of allowances and pensions, and for providing essential services, while minimizing possible damage for policyholders and savers," he added.

Published by Globes, Israel business news - - on March 15, 2020

© Copyright of Globes Publisher Itonut (1983) Ltd. 2020

Moshe Bareket
Moshe Bareket
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