Solvency II Regulations Constrain 11.2 Trillion Euro Investments

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Insurers in Europe, which manage about 8.5 trillion euros ($11.2 trillion) of client money, say their role as long-term investors may be hurt by new regulation. Planned new risk-based rules for insurers in the European Union, dubbed Solvency II, “still require the companies to hold inappropriately high amounts of capital against their long-term investments,” Michaela Koller, director general of industry lobby group Insurance Europe, said in a statement. “This will make it more expensive for insurers to invest in long-term government and corporate bonds, as well as growth-stimulating activities, such as infrastructure projects,” Koller said. Europe’s regulators have said they won’t relax rules designed to protect customers from risk associated with investments in infrastructure projects such as wind parks and power grids, Gabriel Bernardino, chairman of the European Insurance and Occupational Pensions Authority, or Eiopa, said in an interview in June. Carriers including Allianz SE, Europe’s biggest, argue the rules will deprive them of a new area of investment that could help offset low returns on fixed income, where they traditionally had put most of their customers’ money. The proposed level of capital requirements would put infrastructure and renewable energy investments in the same risk category as private-equity and hedge-fund commitments, which would be too high, they have said. Discouraging insurers from making such investments “would have a significantly negative effect on the European economy at a time when boosting growth is an overall policy objective,” Koller said. ....

Solvency II Regulations Constrain 11.2 Trillion Euro Investments