In this regard, Insurance Europe and Invest Europe have published a joint position paper that calls on the European Commission to make improvements to Solvency II to remove unnecessary barriers that undermine insurers' ability to invest in long-term equities.
This includes a detrimental impact on all types of investments in equities, including private equity and venture capital.
It is important that the review of Solvency II brings about much needed improvements to enable insurers, who are key institutional investors, to make long-term investments in the European economy and to contribute fully to the EU's objectives set out in the Green Deal and the Capital Markets Union.
To achieve this, the review of Solvency II must achieve three things:
- Free-up insurers' risk-taking capacity via appropriate reductions in the risk margin and improvements to the volatility adjustment and the matching adjustment.
- Avoid unnecessary and excessive increases in capital requirements (eg avoid unnecessary increases in liabilities due to changes to risk-free rate curve extrapolation).
- Improve the treatment of equities in Solvency II.
Introducing these improvements to the LTE module, along with the other improvements to Solvency II noted earlier, will increase insurers' capacity and appetite to increase their investments in all types of equity including private equity, venture capital and infrastructure.
Source: Insurance Europe