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.
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