Apologies for disrupting everyone's post-lunch snoozes on a Friday, but there has been glimmmers of a quite key development in the (especially life) insurance industry on Wednesday:

http://www.risk.net/life-and-pensions/news/1559438/cfo-forum...

"After months of speculation the Chief Financial Officer (CFO) Forum has amended the principles of its controversial Market Consistent Embedded Value (MCEV) metric to include a liquidity premium, and endorsed its use for Solvency II."

"Under the changes, assets and liabilities will be discounted using a rate, including a premium "where appropriate", added to the swap-yield curve corresponding to the currency of the cashflows. A spokesman for the group's chairman, Phillip Scott of UK insurer Aviva, would give no further details on the implementation other than that the CFO Forum would be working to develop more detailed guidance."

Huge implications for the annuity writers. They had previously been facing massive investor communication in future results, as stating them on the as-was MCEV basis would mean that annutiy business would be essentially unprofitable. There will still be profitability hits, but the discount rate used to discount liabilities will now be increased to take account of the liquidity premium which insurers are able to benefit from, as they are able to hold the assets to maturity.

Very techy; but quite key. Will benefit Pru, Aviva, L&G.

Now; if only they can get CEIOPS to budge in their Solvency II discussions - then they'd really be getting somewhere......

Cheers
K