At the end of 2008 the Italian insurance regulator, ISVAP, issued a consultation paper on a proposed new regulation which aims to help insurers during the crisis in financial markets.  

The regulation allows Italian insurers to opt for a special regime for the evaluation of short term investments in securities. Under the current rules, such assets should be registered by the insurers at the lesser value between the acquisition cost and the "year-end" value. This technique, if applied in the current financial climate, could have a significant negative impact on insurers' balance sheets.  

In order to avoid the possible impact on balance sheets, the draft regulation proposes to allow insurers to register short terms investments in securities at the value represented in their half-yearly balance sheet as at June 2008. The capacity for insurers to opt for the proposed new regime is, however, subject to the condition that insurers establish a reserve equal to the potential depreciation of the assets, which should not exceed 15 per cent of the solvency margin of the insurer.  

The technique described above may also be used to determine the solvency margin and the value of assets covering the reserves, which are linked to the values registered in insurer's balance sheets. In this situation insurers can integrate their reserves with further assets free of any encumbrances (whose value shall be equal to the potential depreciation of the assets valued in accordance with the new accounting criteria). Insurers will be obliged to value at zero those securities issued by companies for which insolvency procedures have already commenced (ISVAP expressly mention Lehman Brothers as an example).  

Finally, ISVAP has clarified that the use of the new accounting criteria should compliment the structure and development of the investments made by the company. Potentially ISVAP could ask the insurer to integrate their reserves where such requirements are not deemed to have been met.