Solvency II: Europe is rewriting the rules for long-term capital
The tension is increasingly visible.
Changes to Solvency II, the treatment of long-term equity investments, infrastructure and securitisation all form part of a broader debate about how insurers should invest.
The political objective is clear enough: mobilise more long-term European savings towards productive investment. Translating that ambition into portfolios is harder.
A lower capital charge does not automatically create an allocation. Insurers must still consider liquidity, accounting volatility, liability matching, governance and expected returns. Investment committees do not allocate capital merely because regulation permits them to do so.
This is why the impact of regulatory reform is often overestimated before implementation and underestimated afterwards.
Individual technical changes can appear small. Collectively, however, they alter the relative economics of different assets.
The important regulatory story is therefore not how much capital Europe says it wants to mobilise, but where the rules are gradually making that capital easier to deploy.
