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The European Commission proposed an amendment to EU prudential rules, known as Solvency II, as part of the CMU Action Plan launched on 30 September 2015. This amendment to a delegated act under Solvency II was published today in the Official Journal and enters into force tomorrow, 2 April 2016.
Investment in infrastructure projects is essential to support economic activity and growth in Europe. By removing the challenge to investment experienced by insurance companies, the measures coming into force today will mobilise private sector investment, which is a key objective of the Investment Plan for Europe. The insurance industry is well-equipped to provide long-term finance by investing in equity shares as well as loans of infrastructure projects, but currently less than 1% of their total assets are allocated for this purpose. As a result of this change to Solvency II, insurers will have to allocate less capital and find it more attractive to increase investment and play a bigger role in European infrastructure projects.
Jonathan Hill, Commissioner for Financial Services, Financial Stability and Capital Markets Union, said: “One of the goals of the CMU is to promote growth and jobs by knocking down barriers to investment. Insurers told us that some of the Solvency II rules were putting them off investing in infrastructure. We have listened to what they said - as from today they will find it easier and more attractive to invest in European infrastructure projects. I hope they will take advantage of this change."
Based on expert advice from the European Insurance and Occupational Pensions Authority (EIOPA), today's delegated act lowers certain requirements for investing in so–called qualifying infrastructure projects. In particular, it lowers the risk charges for insurers' equity and debt investments in these projects, under the standard formula for calculating capital requirements in Solvency II. The risk calibration for investment in unlisted equity shares of such projects has been reduced from 49% to 30%. Risk charges for investments in infrastructure debt were also reduced by up to 40%.