Insurers are attracting the attentions of European Union policy makers who are trying to spur investment in long-term infrastructure projects needed to undergird the regions stuttering economic recovery.
The European Commission, the EU’s executive arm, will publish capital rules for insurers today that will include lower requirements for investments in cross-border funds focused on lengthy projects, said Klaus Wiedner, head of the insurance and pensions unit within the commission’s department for financial services.
Michel Barnier, the EU’s financial-services chief, proposed last year that funds meeting minimum EU criteria on governance and strategy should be designated European Long-Term Investment Funds and designed to increase non-bank financing for companies. The funds would be given a passport to market themselves throughout the 28-nation bloc.
Such funds would be “geared toward long-term investments and infrastructure,” Wiedner said in an Oct. 8 interview in Brussels. “And obviously we want to make sure that there are no obstacles for investing in those kinds of funds, where we hope then the money will be channeled into those projects that we want to promote.”
The commission’s plan would set a “lower risk weighting for investments into those funds,” which would in turn keep down insurers’ capital requirements, Wiedner said.
The same would also apply to European Venture Capital Funds, another type of EU-branded investment vehicle.
While legislation on these funds is already on the EU’s statute books, Barnier’s plans for the long-term investment funds are still being debated by nations and EU lawmakers.
Fixed-Income Assets
Wiedner leads the EU commission’s efforts to implement a new risk-based set of rules for insurers in the EU, dubbed Solvency II. Low interest rates are weighing on earnings for an industry that is still predominantly invested in fixed-income assets such as government and corporate bonds.
The measures that the commission will present take the form of a so-called delegated act that fleshes out the Solvency II rules. The text will be sent to national governments and the European Parliament, which have a window to raise objections before it becomes law.
Insurers have asked the commission to lower risk charges on investments in infrastructure projects such as power grids and roads to help them move a bigger share of their investments to such higher-yielding assets.
Companies including Allianz SE, Europe’s biggest insurer, argue high capital charges will deprive them of a new area of investment that could be a way out of their investment problem and help finance infrastructure projects amid restrained government budgets.
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