On 26 June the European Commission proposed a new investment fund framework for investors who wish to put money into companies and projects for the long term. Ahead of the European Parliament finalising its report on these private European Long-Term Investment Funds (ELTIF), Insurance Europe has today published its position on the EC initiative, which it broadly welcomes.
It does, however, raise significant concerns over the treatment of ELTIF under the forthcoming Solvency II regulatory regime. The unnecessarily high capital charge in the solvency capital requirement (SCR) and the volatility generated in insurers’ own funds would deter insurers from investing in such funds.
The EC has asked the European Insurance and Occupational Pensions Authority (EIOPA) to review the design and calibrations of capital charges for long-term assets in the delegated acts that add detail to the Solvency II Framework Directive. A report is expected soon. Given the evidence that long-term risks for infrastructure and other assets targeted for the ELTIF are lower than implied by the draft Solvency II calibrations, the industry hopes that the EC and EIOPA find solutions to make ELTIF viable investments for insurance companies.