Capital Markets Union: Making it easier for insurers to invest in the real economy

euro currency 2019

© European Union , 2018 / Source: EC – Audiovisual Service / Photo: Mauro Bottaro

This article is brought to you in association with the European Commission.


The European Commission adopted today new rules to help insurers to invest in equity and private debt and to provide long-term capital financing.

The insurance industry is well-equipped to provide long-term finance by investing in equity and private debt, including of small and medium enterprises (SMEs), but the actual share of their investments in the real economy remains limited. As a result of today’s rules, insurers will have to hold less capital for such investments and will therefore find it more attractive to invest in the economy. This will further help mobilise private sector investment – a key objective of the Capital Markets Union. The newly adopted rules, which take the form of a Delegated Regulation, amend the EU prudential rules for the insurance sector, known as Solvency II, and follow up from the Mid-term review of the CMU Action Plan.

Commission Vice-President Valdis Dombrovskis, responsible for the Euro and Social Dialogue, also in charge of Financial Stability, Financial Services and Capital Markets Union, said: “One of the main objectives of the CMU is to foster economic growth in Europe by removing barriers to investment. Insurers were highlighting that some of the Solvency II rules were preventing them from investing more in equity and private debt. We have listened to their concerns. The amendments adopted today will make it easier and more attractive for them to invest in SMEs and to provide long-term funding to the economy”.

Jyrki Katainen, Vice-President responsible for Jobs, Growth, Investment and Competitiveness said:“SMEs can play a crucial role in job creation and sustainable economic growth. To fulfil that role, they need access to a broad range of financing options, including via equity and privately-placed debt. Today’s actions will allow SMEs and other companies to have better access to such financing instruments from insurers. I am confident that this change will contribute to growth and prosperity across the Union”.

Based on expert advice from the European Insurance and Occupational Pensions Authority (EIOPA) and in-depth analyses by the Commission, today’s Delegated Act lowers the capital requirements for insurers’ investments in equity and private debt, also aligning the rules applicable to banks and insurers.

Today’s amendments also change various other aspects of the Solvency II implementing rules, such as:

  • new simplifications in the calculation of capital requirements,
  • improved alignment between the insurance and banking prudential legislations,
  • updated principles and standard parameters to better reflect developments in risk management and the most recent data (including a better treatment of financial hedging strategies).

This will improve the balance between burden and risk and ensure that Solvency II remains up-to-date.

Next steps:

The amendments will now be subject to a scrutiny period of 3 months by the European Parliament and the Council.

Background:

This legislation takes the form of an amendment to Commission Delegated Regulation (EU) 2015/35 (Solvency II implementing rules). Solvency II is the first harmonised, risk-based EU-wide prudential framework for the insurance sector. This amendment is part of a scheduled review of the implementing rules of the Solvency II insurance regulatory framework, which precedes a more fundamental review of the Solvency II Directive in 2020.

Several previous targeted amendments to the Solvency II implementing rules adopted between 2015 and 2018 have already contributed to the objectives of the Capital Markets Union Action Plan, and supported insurers’ investments in the real economy. In particular, in 2015 and 2017, the Commission introduced preferential treatments in the standard formula capital requirements to equity and debt investments in infrastructure projects and infrastructure corporates. In 2018, the Implementing Measures were amended to introduce more tailored capital requirements for simple, transparent and standardised securitisation.

the sting Milestone

Featured Stings

Can we feed everyone without unleashing disaster? Read on

These campaigners want to give a quarter of the UK back to nature

How to build a more resilient and inclusive global system

Stopping antimicrobial resistance would cost just USD 2 per person a year

Coronavirus response: over €1 billion from EU Cohesion policy to support Spain’s recovery

The hidden pandemic: mental illness

JADE Team at the European Business Summit 2017

Populist Eurosceptics helped by Trumpists seriously threaten the EU edifice

A Sting Exclusive: “Entrepreneurship in the Coronavirus (COVID-19) era” written by the Vice-President of Junior Enterprises Europe

‘Endemic’ sexual violence surging in South Sudan: UN human rights office

Eurozone governed by an obscure body and gray procedures

Climate changes and the imminent public health crises

Eurozone recession subsides

More funds needed to counter ‘persistent and multi-faceted humanitarian problems’ in Ethiopia

Cohesion Policy after 2020: preparing the future of EU investments in health

On their epic journeys, migratory birds connect nations and inspire people, UN says on World Day

Rapid action needed for people to meet challenges of changing world of work

Libya ‘in race against time’, but dissolving conflict ‘a realistic prospect’, Security Council hears

Why India can show us how to achieve growth with purpose

Opening – February plenary session, 27 new seats

Telemedicine and the Brazilian reality

This is what great leadership looks like in the digital age

UNESCO food and culture forum dishes up fresh serving of SDGs

‘True’ peace, requires standing up for human rights, says UN chief Guterres

Iran: UN rights chief ‘deeply disturbed’ by continuing executions of juvenile offenders

WhatsApp to face scrutiny from EU regulators task force over data sharing with Facebook

Tuesday’s Daily Brief: funding for Palestine refugees, families today, tech surveillance

UN and African Union in ‘common battle’ for development and climate change financing

China is adding a London-sized electric bus fleet every five weeks

UN investigates systematic sexual violence across South Sudan

They won this year’s Nobel for economics. Here’s why their work matters

Living to 100: why we should plan for more sushi, chocolate and work

COP22 addresses a strong global pledge to effectively implement the Paris Agreement

Restore hope that peace will come to the Middle East, UN negotiator urges Security Council

Seaweed straws and loose-leaf tea: 6 ways to reduce plastic waste

South Sudan ‘heading towards lasting peace and stability’, UN General Assembly told

3 ways activists are being targeted by cyberattacks

Facts and prejudices about work

How global tech companies can champion ethical AI

Universal Health Coverage in the EU: Are we really leaving no one behind?

Easier Schengen Visas for non-EU holiday makers: A crucial issue for south Eurozone countries

Yemen agreement to end southern power struggle ‘important step’ towards peace: UN Special Envoy

System value can power the energy transition in emerging markets

Future of Insurance Claims in Focus at Fourth Annual Connected Claims Europe Summit

The multidisciplinary team facing the multidrug resistant form of Tuberculosis in the state of Amazonas (Brazil)

Ukraine pays the price for lying between Russia and the EU

UN experts urge Turkey to repatriate Irish woman associated with terror group

We won’t win the online security war without people power

Across the world, women outlive men. This is why

A ‘system value’ approach can accelerate the energy transition. Here’s how

How tiny countries top social and economic league tables (and win at football, too)

Geopolitics and investment in emerging markets after COVID-19

The blackened white coat of the doctors

COP21 Breaking News: “There is an ecological debt that the world needs to pay back to Africa”, French President Francois Hollande promises 2 Billion euros by 2020 from Paris

Conference on Future of Europe should start “as soon as possible in autumn 2020”

Roma integration: fight social exclusion, poverty and anti-gypsyism, MEPs demand

Car rentals: EU action leads to clearer and more transparent pricing

Paradise islands of Pacific increasingly vulnerable to climate change, as UN boosts resilience

Key quotes from China’s Premier Li on COVID-19, the economy and US relations

Right2Water initiative: Is the Commission ready to listen to citizens?

Coronavirus: Commission Statement on consulting Member States on proposal to prolong and adjust State aid Temporary Framework

3 ways to stop COVID-19 from drying up start-up talent pools

UN launches ‘South-South Galaxy’ knowledge-sharing platform in Buenos Aires

Investors have a role in securing our shared digital future

More Stings?

Advertising

Speak your Mind Here

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s