“Austria is forbidding insurers from selling credit-default swap debt protection because the derivative contracts circumvent industry rules.
“CDSs are usually meant to cover a certain economic risk of a third party,” the nation’s Finanzmarktaufsicht regulator said in a circular sent to insurers in the Alpine country that was published today. “But they intentionally aim to reach that goal with other means than insurance, because the regulations applicable to the insurance business are to be avoided.”
Austrian insurers have written only a “limited amount” of credit protection through swaps, FMA spokesman Klaus Grubelnik said by phone from Vienna. The circular clarifies existing laws prompted by an isolated violation, he said. He declined to elaborate.”
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