The Pfandbrief 2011 | 2012

liabilities and which plan to optimise their regulatory capital requirements. In QIS5, both government
debt and mortgage loans required lower solvency capital requirements. Ignoring all
other decision-making criteria, investors would thus prefer these assets when creating their
investment portfolio.
In addition to the solvency capital requirements that have been the main focus of this
paper, Solvency II also introduces changes to the valuation of assets for regulatory purposes.
This also has an impact on Pfandbriefe. Under Solvency II, all investments will in future be
valued on the basis of their current value. This will generally have the effect of increasing the
volatility of balance sheet values on the asset side. As a result, Solvency II could render one
major reason to design Pfandbriefe as registered bonds irrelevant. The increased volatility in
the regulatory balance sheet could be problematic, even if accounting principles in accordance
with German commercial law are not affected by Solvency II. In some circumstances, insurers
with long-term liabilities will have a particularly strong incentive to change their management
of the asset and liabilities sides conforming to short-term volatility in their regulatory balance
sheet, although their obligations will not have to be serviced for many years.
Overall, however, Pfandbriefe will continue to play a very important role in the investment
allocation of German insurers as a result of their excellent credit ratings, stable returns and
established infrastructure.
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