In its report on long-term investments1, EIOPA came to the conclusion that a new calibration of the capital requirements for infrastructure investments within the standard formula could not be recommended. Ultimately, it felt there was not enough granular data.
However, after political and industry lobbying, the European Commission called on EIOPA for further advice and so EIOPA has started a new work stream on infrastructure investments by insurers concentrating on a more granular treatment of infrastructure investments within the regulatory framework of Solvency II.
As a first step, EIOPA issued a Discussion Paper on 27 March 2015. In the introduction, they describe their task as “challenging” and the rest of the paper follows that theme. Ultimately, there is not much input from EIOPA but a lot of questions to industry about how they can approach this task, from how to identify and classify various investments through minimum eligibility features to sources of potential data to justify more favourable capital treatments.
It will be interesting to see who responds to this DP. The vast majority of insurers will not have the knowledge or data to be able to answer a lot of the questions. Even originators such as investment banks may not have enough granular data to justify significant changes. It may be that this task is beyond “challenging”!
The discussion paper can be found on the EIOPA website.
1EIOPA (2013): Technical Report on Standard Formula Design and Calibration for Certain Long Term Investments