INREV rallies troops to fight insurance body over Solvency II

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European real estate associations have rallied around to get the EU’s insurance authority EIOPA to give proper consideration to real estate in its forthcoming review of the upcoming Solvency II directive, amid fears that the authority is about to neglect the asset class entirely.

The Frankfurt-based European Insurance and Occupational Pensions Authority EIOPA is facing a concerted campaign led by funds association INREV to include real estate in its upcoming review of the capital requirements for insurance companies, a key part of the Solvency II directive.  As it currently stands, the proposal stipulates capital charges of up to 25% for all real estate held by insurers, a move the industry sees as excessive and unnecessarily burdensome, citing the relative stability of the asset in comparison to securities holdings After a number of delays, Solvency II now looks likely to be introduced across Europe from 2015.

In a letter to EIOPA in September, Jonathan Faull, Director General of the European Commission’s Internal Market and Services, requested that the capital requirements for insurance companies investing in different asset classes be reviewed to ensure they do not impede much-needed investment and long-term financing of the real economy in Europe.

INREV and twelve other national and pan-European bodies, which together represent a wide section of the real estate industry in Europe, are adamant that real estate should be included.  INREV Public Affairs Director Jeff Rupp said: “Real estate is a major contributor to the European economy. Our industry accounted for 2.5% of total GDP in 2011 and it employs 4m people. It would be negligent for EIOPA to ignore this important asset class.”

The industry sees the review as an important opportunity for EIOPA to correct unrealistic calculations of its capital requirements, which derive from calculations based on grossly inadequate data, leading regulators to adopt an excessively narrow a view of the risk profile of property investment. Furthermore, real estate shares similar characteristics to infrastructure, which Faull highlighted as needing to be re-examined, Rupp notes.


Despite the fact that the letter from Faull was issued in September, INREV and supporting organisations only recently discovered that EIOPA planned not to include real estate in the review. According to INREV, this underlines the lack of transparency that has been at the heart of EIOPA’s approach since the outset. “Let’s hope EIOPA doesn’t miss this vital opportunity to do the appropriate thing and include real estate in its review. The stakes are too high to miscalculate the capital requirements for a second time,” concluded Rupp. 


The Amsterdam-based INREV, the European Association for Investors in Non-listed Real Estate vehicles, has 348 members from leading institutional investors, fund managers, promoters and advisors.