2 September 2014Asset management analysis

European investments in danger

Concerns remain about the implications of Solvency II despite continued investment growth in the European economy during 2013.

Insurers are apprehensive about how the directive will affect their ability to continue as Europe’s largest long-term stable investors, according to a booklet by the re/insurance federation, Insurance Europe.

European insurance investments were up 3.2 percent to €8.5 trillion in 2013. The booklet also found that Europe continued to be the world’s largest insurance market in 2013, representing 35 percent of the global insurance market. It was closely followed by the United States, comprising 30 percent, Asia at 28 percent, with Oceania and Africa at 3 percent.

Michaela Koller, director general of Insurance Europe, said: “Insurers make a huge contribution to the European economy by promoting growth and stability through long-term investments equal to around 60 percent of Europe’s GDP. This role is, however, under threat. While the industry welcomes the move to a risk-based regulatory regime and recognises that the final version of Solvency II was improved to avoid a huge negative impact on long-term investments, aspects of the directive and how it is implemented will still require insurers to hold inappropriately high amounts of capital against their long-term investments.

“This will make it more expensive for insurers to invest in long-term government and corporate bonds, as well as growth-stimulating activities, such as infrastructure projects. This could discourage insurers from making these vital investments, which would have a significantly negative effect on the European economy at a time when boosting growth is an overall policy objective.”