While Insurance Europe welcomes the IAIS proposal for a differentiated and more appropriate capital treatment of infrastructure and strategic equity investments, further improvements should be made to the criteria to better reflect the actual risks the assets pose to insurers and the different approaches insurers take in making long-term investments.  

The IAIS should acknowledge the relevant risk exposures insurers face in making these kinds of investments. For example, due to their long-term approach to investment, insurers are exposed to more long-term risks, such as default and underperformance, rather than short-term risks, such as price fluctuations in the assets.

This is because insurers tend to invest through diversified portfolios that match their liabilities, so are unlikely to need to sell assets at short notice. Furthermore, there is already extensive evidence that demonstrates how infrastructure investments are less volatile than other assets, meaning short-term price fluctuations are less relevant.

The IAIS should also recognise the fact that insurers’ approaches to making long-term investments take various forms, depending on the individual insurer’s strategy.