EFSF Bond Insurance Plan Gaining Traction

With time running out to finalize the euro zone’s bailout fund, a plan by giant German insurer Allianz to turn the fund into a bond insurance program is gaining traction, the company’s top executives said Tuesday.

The proposal to turn the European Financial Stability Facility into a institution that protects investors against a portion of losses has garnered support from other major European insurers and banks in the region, Paul Achleitner, the proposal’s architect and a member of Allianz’s board of management said during an interview with the Wall Street Journal and Dow Jones Newswires. After initial setbacks, the plan is now also being taken seriously by euro zone governments, Achleitner said.

With EUR450 billion in global insurance assets and EUR1.5 trillion in overall assets under management, Allianz is the continent’s largest investment institution.

“Don’t use the EFSF as a lender, use it as a bond insurer,” said Achleitner, who added that his plan would expand the impact of the EFSF, which currently has a lending capacity of 440 billion euros, to cover more than EUR3 trillion in bonds. That estimate assumes that 20% of the debt issued is insured and that it draws upon the full EUR780 billion that euro-zone governments have agreed to guarantee as backstop to the EFSF.

The WallStreetJournal

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Dean Popplewell

Dean Popplewell

Vice-President of Market Analysis at MarketPulse
Dean Popplewell has nearly two decades of experience trading currencies and fixed income instruments. He has a deep understanding of market fundamentals and the impact of global events on capital markets. He is respected among professional traders for his skilled analysis and career history as global head of trading for firms such as Scotia Capital and BMO Nesbitt Burns. Since joining OANDA in 2006, Dean has played an instrumental role in driving awareness of the forex market as an emerging asset class for retail investors, as well as providing expert counsel to a number of internal teams on how to best serve clients and industry stakeholders.
Dean Popplewell