The European Commission published today its proposal to revise the Solvency Directive, which sets common rules for the risk management and supervision of insurance companies in the European Union. This revision paves the way towards reducing undue costs and barriers that still apply to insurers seeking to invest equity directly or indirectly into long-term projects.
Over the past 5 years, insurance undertakings invested €45 billion into private equity, making up around 9% of the overall capital raised by these funds. Insurers, which are long-term investors by nature, supported thousands of businesses across the continent by committing capital into private equity funds. Yet, insurers’ investment in equities remains extremely low – with an asset allocation in equity funds of only 3,3% (0,6% in private equity) according to the most recent EIOPA statistics.
Changes to the criteria defining the long-term equities category, which will be part of the announced review of the Delegated Regulation, offer a perfect opportunity to better acknowledge the way insurers hold long-term assets and to incentivise them to set up long-term portfolios. Seizing the high potential for improvement could ultimately drive the insurers’ ability to support businesses by investing into venture and private equity funds.
As the representative of the European private equity community, including both fund managers and investors into these funds, Invest Europe is looking forward to working with the co-legislators to ensure insurance undertakings are in a position to commit some of their capital to long-term equity funds while maintaining the high prudential standards of the framework.
For more details on Invest Europe’s position on the review, please look at our position paper here.