Selling Aviation Debt Securities to EU Insurance Undertakings – A Salesperson’s Dream or not?

"Selling Aviation Debt Securities to EU Insurance Undertakings – A Salesperson’s Dream or not?"  A paper from the Banking and Aviation Committee, a sub-committee of Wider Fields committee. 

Increasingly, airlines and aviation lessors are turning to the debt capital markets to fund the very significant capital expenditure required to purchase aircraft.  The paper briefly explores the reasons for this trend and considers the attractiveness of aviation debt securities for the asset portfolios of life and non-life insurance companies.  For life companies, the authors focus on the potential attractiveness of aviation debt securities for both non-linked and unit-linked asset portfolios. 

The range of debt securities issued by airlines and aircraft lessors is covered in the paper with a focus on both unsecured bonds and asset-backed securitisation bonds. 

The potential attractiveness of aviation debt securities to EU domiciled and regulated life and non-life insurance companies is examined under a number of headings including:

1. Potential yield;
2. Credit risk;
3. Currency risk;
4. Interest rate risk;
5. The pre-diversification market risk and counterparty default risk modules of the SCR under the standard formula; and
6. Implications for IFRS financial statements. 

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