The European Insurance and Occupational Pensions Authority (EIOPA) has published the final version of its Technical Advice to the European Commission on the identification and calibration of infrastructure corporates. Our post of 18 April 2016 explains the background. In its latest advice, EIOPA recommends:

  1. the extension of the infrastructure corporates asset class, so that infrastructure corporates that meet a set of pre-determined tests, can be treated in the same way as infrastructure projects;
  2. differentiated treatment of equity investments in high quality infrastructure corporates;
  3. a reduction in the risk charges for equity investments in corporates with a lower risk profile; and
  4. requiring (re)insurers (a) to conduct adequate due diligence on their infrastructure corporate investments; (b) to establish and maintain written procedures for monitoring the performance of these investments and expsoures; and (c) to stress test the cash flows and collateral values that are being used to support them.

EIOPA hopes and expects that these recommendations (if implemented) will help insurers to better match their long-term insurance liabilities, increase the diversification of their investment portfolios, and enhance policyholder protection.

The Commission accepted EIOPA’s last infrastructure corporates advice the day after it was submitted, and immediately adopted an amendment to the Solvency II Delegated Regulation. In our post of 18 April 2016, we predicted that EIOPA would publish this advice “in (say) July 2016“, and that it would be “adopted immediately afterwards“. That’s 1 out of 2, so far. Watch this space for the second.