The German Insurance Association (GDV) welcomes the Commission's intent to start a debate on how to foster the supply of long-term financing in Europe, but is concerned that some of the ongoing regulatory initiatives may actually create a short-term bias for investment behaviour.
With total assets of about €1,355 billion, the German insurance industry is a major institutional investor at international capital markets. Through its provision of savings, pensions and other long-term products, insurers are typically long-term investors with average in-vestment maturities on the life side in excess of ten years.
The GDV is concerned that some of the ongoing regulatory initiatives such as the EMIR derivatives regulation may create even a short-term bias for investment behaviour. Before addressing the questions raised in the Green Paper the GDV would like to highlight some core points for thorough consideration that should be regarded from an investor’s perspective:
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Compared to other financial institutions such as banks, insurers have fundamentally different macro-economic purposes and tasks, business models and risk profiles.
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The present capital backing of spread risk in the Solvency II Directive provides clear incentives not to invest in long-term assets. The capital charge is based on merely temporary fluctuations of spreads. Both deficiencies aggravate for longer investments hindering insurers from harmonising the duration of their assets and liabilities.
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Solvency II capital requirements of up to 59 per cent for investments in low risk infrastructure projects are too high and limit the scale of insurers’ investments in infrastructure projects.
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Accounting standards will only be acceptable for long term-orientated insurers if they fit the existing insurance business model rather than compel the insurance industry to change its business model to fit the standards provisions.
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© GDV Gesamtverband der Deutschen Versicherungswirtschaft e.V.
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