EIOPA advises to enhance the asset class for high-quality infrastructure investments under Solvency II

30 June 2016

The European Insurance and Occupational Pensions Authority published the Technical Advice to the European Commission on the identification and calibration of infrastructure corporates.

In its latest advice EIOPA recommends to extend this asset class in two ways:

• First, to allow certain infrastructure corporates to qualify for the treatment for infrastructure projects provided that there is an equivalent level of risk.
• Second, to create a separate differentiated treatment for equity investments in high-quality infrastructure corporates.

For those corporates that have a lower risk profile, EIOPA proposes to reduce the risk charges for equity investments.

Furthermore, EIOPA recommends that insurers are required to conduct adequate due diligence, establish written procedures to monitor the performance of their exposures and perform stress testing on the cash flows and collateral values supporting their investment.

Gabriel Bernardino, Chairman of EIOPA, said: "After having carefully analysed the evidence available we propose a risk-based enhancement of the Solvency II asset class for high-quality infrastructure investments regarding infrastructure corporates. As infrastructure investments can be complex they require prudentially sound treatment and specific risk management expertise. Where the risks are properly managed, our proposals will help insurers to match their long-term liabilities, to increase their portfolio diversification, and thereby better protect policy holders and support the strategic objective of building the EU Capital Markets Union". 

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