Draft plans to cut the capital charges imposed on infrastructure under Solvency II are not sufficient to remove the unnecessary barriers to insurers' investments in this asset class, Insurance Europe has said.
The industry trade body said that the proposed definition of qualifying investments is "too narrow" and the capital charges "still exaggerate the risks" these investments pose to insurers.
The comments were made in its formal response to a consultation paper published in July by the European Insurance and Occupational Pensions Authority (Eiopa). Eiopa has sought feedback on a draft version of the technical advice on the treatment of infrastructure under the standard formula.
"Although it is difficult to determine the exact risk parameters, there is enough evidence that a risk-based calibration can be set at significantly lower levels for both infrastructure debt and equity," Insurance Europe said.
The industry trade body called on Eiopa to extend the definition of qualifying assets to corporates operating infrastructure assets and ease the criteria, so that more projects qualify. Furthermore, it said that internal credit ratings should be considered equivalent to external ratings.
Regarding the recalibration proposals, Insurance Europe insisted that a proposal for a calibration in the counterparty risk module should be included in the advice. If the calibration in the spread risk module is chosen, a combination of liquidity and credit risk should be considered, it added.
Insurance Europe also urged regulators to allow for diversification benefits created by investments in infrastructure.
Eiopa will submit its proposals to the European Commission in the autumn. The authority's advice is not binding. The Commission said it will amend the regulations before Solvency II goes live in January 2016.
