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Insurers comment on FSB work on regulatory barriers to infrastructure finance

Insurance Europe has published its response to a Financial Stability Board (FSB) consultation on the effects of financial regulatory reforms on infrastructure finance.

Insurance Europe welcomed the FSB’s work and specifically its assessment of the unintended impacts of financial regulation. It reiterated that this kind of analysis should also be done before regulation is implemented, not just afterwards.

Regarding Solvency II, while more tailored capital requirements for qualifying infrastructure assets were very much needed and welcomed, the necessary work for assessing whether a specific infrastructure asset qualifies for tailored prudential treatment is often unnecessarily extensive and resource-intensive.

Regarding potential barriers in prudential regulation to long-term investment, Insurance Europe warned that both the measurement of assets/liabilities and capital requirements can damage long-term investment, including in infrastructure. Therefore, any assessment of potential consequences should look at both areas.

A consistent accounting treatment for both assets and liabilities is key to appropriately measuring and supporting insurers’ long-term business model and investments. Therefore, the industry welcomes the alignment between the effective date of International Financial Reporting Standard (IFRS) 9 — Financial instruments — and IFRS 17 — Insurance contracts — for insurers, which is mentioned in the FSB paper.

In addition, the limited supply of suitable infrastructure assets remains a key concern for the European insurance industry and a key barrier to more investment.

Published 29 August 2018
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