Argentina Says Insurers' Dollar Assets Can't Exceed Liabilities

  • Rule change follows new regulations on pension-fund assets
  • New regulation could prompt sale of some dollar assets

Argentina’s insurance regulator changed the rules governing the amount of foreign currency holdings the companies can keep, which could prompt the firms to sell assets to meet a year-end deadline.

Insurance companies must adjust their foreign-currency security holdings to match the amount of foreign-currency contracts they have with clients, according to a resolution published Tuesday in the official gazette. The regulator said that both dollar assets and dollar-denominated assets payable in pesos are considered as foreign currency.

President Cristina Fernandez de Kirchner’s government, which leaves office on Dec. 10 after a Nov. 22 run-off election between the ruling party’s Daniel Scioli and the opposition’s Mauricio Macri, has in the past ordered insurance companies to repatriate foreign holdings and forced them to fill a certain portion of investment portfolios with bonds of companies deemed to be productive or dedicated to infrastructure projects. Multi-national firms in Argentina include ACE Ltd., Allianz SE and Zurich Insurance Group AG, according to the regulator’s website.

With the second-round election approaching, the government, which closely controls the official rate of the peso, is keen to keep parallel exchange rates from weakening further. The measure could also increase the number of dollar-denominated assets circulating in the local market and allow government entities to acquire them as central bank reserves sink toward a nine-year low.

Firms must reach 50 percent compliance with the rules by Nov. 3, 75 percent compliance by Nov. 30 and be in full compliance by Dec. 31.

Last month, the securities regulator ordered mutual funds to change the way they value foreign-currency holdings, sparking a rout in dollar-denominated bonds traded in the local market as firms rushed to sell rather than have to book a loss. The measure temporarily strengthened the exchange rate in a financial transactions market known as the blue-chip swap and prompted funds to stop taking on new client money for a brief period.

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