From the 2nd of April insurers in the EU will find it cheaper and more attractive to invest in infrastructure projects. This is a direct result of one of the initial measures of the Capital Markets Union (CMU) Action Plan which was intially launched in September 2015 and designed to be a key driver in building a true single market for capital across the EU Member States.
This legislation is an amendment to the Solvency II Delegated Act which is the EU-wide framework for the insurance sector. These amendments lower certain requirements for investing in qualifying infrastructure projects. According to the EU press release it “reduces the risk charges for insurers’ equity and debt investments in these projects, under the standard formula for calculating capital requirements in Solvency II.” The risk calibration for investment in unlisted equity shares in projects that fall under this category has been reduced from 49% to 30% and risk charges for investments in infrastructure debt were also reduced by up to 40%.
Today’s act also covers investments pertaining to European Long-Term Investment Funds (ELTIFs). These investments will be brought into line with investments in European Venture Capital Funds and European Social Entrepreneurship Funds due to benefiting from the same capital charges as equities that are traded on regular markets which will be lower than that for other equities.