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Eigenmittelanforderungen nach Sovency II ausbalancieren – Summary GDV-Vorschlag

16.01.2014 – The promotion of long-term sustainable growth is a political objective of first order. To that end, the European Commission and the G20 seek to facilitate the long-term financing of infrastructure development and green growth by institutional investors. In particular, unnecessary regulatory obstacles for long-term investments of the insurance industry in this area should be avoided.

Investments in infrastructure and renewable energies constitute a new asset class generating predictable and stable revenues. Due to their predictable long-term liabilities, insurances are able to invest in these illiquid assets in order to diversify and to match their corresponding obligations. Unlisted investments in infrastructure and renewable energies are not subject to short-term trading and have to be valued based on their future net returns. The fluctuations of the cash-flows – which are often regulated or even guaranteed – are quite small, so that the assets’ economic value is comparatively stable. Under Solvency II, however, long-term investments in infrastructure and renewable energies are still assigned to the same high risk factor as hedge funds or commodities of up to 59 Percent for equity risk type 2.

Therefore, the current treatment is not appropriate. Unlisted infrastructure has rather bond-like characteristics. It generates a cash-flow that is mainly subject to technical-physical risks which are independent from the common market risks. Therefore, these assets should be subject to a new sub-module “infrastructure risk”. Due to the wide range of possible investments, its risk factor should be set at a prudent level of 20 Percent. Furthermore, a list of criteria should exclude projects with higher risks. On top of that, the net present value of the cash-flow is subject to interest rate risk which should be considered in the regular sub-module for interest rate risk.

Those assets, for which the data basis is not sufficient to calculate the interest rate risk, should be subject to the property risk sub-module. The infrastructure and interest rate risk sub-modules should not apply in this case. This fallback solution would still be more appropriate than the cur-rent application of the equity risk sub-module which should only apply to investments that are listed or do not comply with the criteria.

This proposal, calling for the recognition of the particular features of infra-structure and renewable energies in the standard formula, serves the public interest to encourage more long-term investments of this kind in an appropriate and easily realizable way. (vwh)

Link: GDV Summary – Englisch/Deutsch (PDF)

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