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reinsurance division of Berkshire Hathaway. “We face a big debate, particularly between


France and Germany, on how to rescue Greece and keep Europe stable,” he says. “The plan is now to force the banks to write down their in- vestments in sovereign bonds from the affected countries and then be recapitalised by their re- spective governments.” But while the exposure of the insurance and


reinsurance industry to this debt is nowhere near as great as the banks, it is still substantial – a fact that negotiations cannot and should not ignore, says Seitz. “The industry as a whole also has significant


Manfred Seitz, Berkshire Hathaway


Europe has centred on the banks, discussions must also seek ways of helping insurers and reinsurers ride out the crisis, says Manfred Seitz, managing director of the international


W hile the debate around potential solutions to the sovereign debt crisis in


holdings,” he says. “But the question is: if you are going to write down the sovereign debt held by banks, what are you going to do on the insur- ance side?” Seitz sees an additional problem in the form


of Solvency II, which, as it stands, requires no capital charge for sovereign bonds. He believes this to be an unsustainable situation. “That,


26.10.11 WEDNESDAY


Sovereign debt crisis must be solved


contrasted with what is happening on the bank- ing side, is not a feasible scenario,” he says. A solution Seitz proposes would see sover-


eign bond holders holding risk capital against their investments alongside a write down of sov- ereign bonds for the critical countries. “While it has not been a very big point of discussion this year, everyone understands that it is an unre- solved issue,” he says. Seitz also has strong opinions on another contentious issue facing in the industry: the is- sue of the extent to which it has excess capital. Seitz questions whether this is truly the case given the levels of risk the industry holds. “The reinsurance industry is supposed to


have a solid capital base because, other than banks, we are mediating risk, assuming risk and holding risk,” he says. “This means that we need to be heavily capitalised. Given that the industry is said to be overcapitalised by just $10 billion, I don’t think that is a significant margin at all.”


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Wednesday October 26 2010 | INTELLIGENT INSURER —BADEN-BADEN TODAY | 11


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