These concerns cover a range of areas including engagement policy, investment strategy of institutional investors and arrangements with asset managers, transparency of asset managers and related part transactions and remuneration policy. 

 

The insurance industry is the largest European institutional investor. As most of their liabilities are long-term, investing with a long-horizon perspective becomes a natural match between insurer's assets and their liabilities.

 

The main driver of insurers' investment decisions is the profile of their liabilities. Insurers' ability to buy long-term and illiquid assets or to withstand market volatility significantly depends on the insurance product and the liabilities those assets back.

 

Insurers' asset allocation is, therefore, highly dependent on the profile of their liabilities and the percentage share of various assets. This can vary from company to company, depending on the business they undertake. Insurers' average allocation to equity is 15% and the average allocation to bonds is around 60%. European insurers hold around 18% of the total European public equity.

Insurance Europe’s comments are mainly focused on Article 3f, Article 3g and Article 3h, which it believes deserve careful consideration, to correctly reflect institutional investors’ approach to asset and asset/liability management.

 

Insurance Europe would also like to highlight a number of concerns emerging from Article 9 of the proposal, regarding related party transactions and remuneration policy. 

 

The proposal targets the equity holdings and investment strategies of life insurance companies (as indicated in Article 1(f)). Insurance Europe believes that, while the Commission’s intention to foster long-term financing of the economy via equity investments is understandable, a number of provisions in the proposal appear to be based on flawed and/or misleading assumptions.

 

Insurance Europe is concerned by the statements reproaching institutional investors that they do not “sufficiently focus” on the long-term performance of their asset holdings and that they do not engage with the companies in which they hold shares. Such a generalisation cannot be made for insurers, and, therefore, it believes that such a view reflects a flawed understanding of how and why insurers invest and should be amended in the final text.

 

Full position paper