The EU is preparing reduced capital requirements for insurers to spur investment in long-term infrastructure projects.
The European Commission is considering amending insurance rules known as the Solvency II Delegated Act to define an infrastructure asset class that would qualify for preferential capital treatment, according to an internal commission consultation document, seen by Bloomberg.
This is part of EU efforts to kickstart the economy and integrate the bloc’s financial markets.
In the document, the commission says that it would be appropriate to treat the largely unlisted equities held in European long-term investment funds in the same way as listed equities, implying a capital requirement of 39%, less than the 49% charge otherwise imposed on unlisted equities.
This should “help tackle barriers to long-term investment in, for example, infrastructure projects,” according to the document.
“It is important to ensure that available funds flow to where they are most needed and that specific impediments to the financing of long-term investment projects are removed,” the commission said in the document.
“Institutional investment by insurers, as long-term investors, plays a crucial role in supporting this.”
Insurers and pension funds hold assets of about €12tn “which can help to fund investment,” the commission said in its proposal on building a capital markets union.
While some progress has been made in removing obstacles to long-term investments by these companies, “some have called for a tailored treatment of infrastructure investments, in relation to the calibration of the capital requirements of insurers and banks.”
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