How changes to EU insurance capital rules could expand opportunities in securitised credit
As of January 2027, Insurers in Europe will hold reduced Solvency Capital Requirements for certain securitised credit investments, but some are already moving forward.
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Europe’s insurers are preparing for a regulatory shift that could open up opportunities for them to access the potential portfolio benefits of securitised credit. This include diversification and spread premiums versus comparable corporate bonds, lower interest rate and spread duration, and reduced default rates.
For much of the past decade, Solvency II has made it costly for European insurers to hold securitised assets, applying far higher capital charges than those imposed on similarly-rated corporate bonds. The result has been a sharp decline in participation by EU insurers, particularly smaller institutions relying on the “standard formula” capital model.
Reforms finalised in January 2026 and due to take effect in January 2027 will reduce standard formula capital requirements for many investment-grade securitised assets, particularly senior tranches. The changes could improve the economics of holding structured credit and re-open a market that European insurers have largely avoided since the post-crisis regulatory overhaul.
Key considerations include:
- Lower capital charges are expected to improve the relative attractiveness of securitised credit versus traditional corporate bonds.
- “Senior tranches” are likely to see the most significant reductions under the reforms.
- Securitised credit continues to offer diversification benefits, structural protections and shorter-duration cashflows, as well as potential spread premiums compared to equivalently rated corporate bonds.
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