Proposals which would make it much less attractive for German insurers to invest in private equity and venture capital funds were issued for consultation last week, according to law firm King & Wood Mallesons S J Berwin. The German government is discussing amendments to the "Anlageverordnung", the regulations which stipulate the requirements for eligible investments by German insurers. These new rules would apply until Solvency II becomes effective in 2016. At present, most private equity and venture capital funds fall within the criteria for eligible equity investments, as long as they are EEA- or OECD-domiciled and comply with certain criteria. "Until now, it has been relatively straightforward for most managers to comply," noted KWM S J Berwin. But under the proposed new rules, funds will need to be managed by an OECD- or EEA-resident manager which is licensed under the Alternative Investment Fund Managers Directive and subject to the jurisdiction of an OECD full member state. The fund must also be "close-ended" and invest only in equities and equity-like assets, the law firm said. The potential drawbacks of the revised regulations may mean that "insurance companies will opt not to invest in this asset class at all in future, or at least significantly reduce their exposure to it," KWM S J Berwin concluded. The draft proposals are available for comment until 27 June 2014.