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Insurance Strategy

Investment regulation for insurers in 2020

Miguel Tizzone

Miguel Tizzone

Insurance ALM Strategist

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2020 will be a year of significant change to the regulatory environment for European insurers. The key themes dominating the regulatory changes are (1) the European Commission’s commitment to expanding the European Capital Market’s Union, (2) the increasing focus on risk awareness and management and (3) developments in ESG investing. The regulatory changes have particular impacts on private assets which have created opportunities for insurers.

Key changes in 2019
The Long-term Equity (‘LTE‘) carve-out was one of the more important insurance investment changes of last year. The change, driven by the European Commission, provides capital relief to insurers investing in European stocks for the long-term.

EIOPA published its advice earlier last year on sustainability issues. There were no immediate implications to insurers’ investment practices however it is clear that mounting pressure is likely to require more disclosure and risk awareness from insurers on ESG going forward.

Local regulators have also pursued changes relating to increased transparency and prudential risk management. In the UK, the Prudential Regulatory Authority (PRA) has published several consultation papers and statements focused on increasing organisational accountability and internal risk management within insurers.

The biggest change to affect insurers however will undoubtedly prove to be the regulatory changes to the EIOPA risk-free curve and interest rate risk calculations.



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