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Assistance to insurance undertakings and asset managers in determining eligibility to lighter capital requirements for their infrastructure investments
ContextInsurance undertakings and pension funds are naturally attracted to infrastructure investments since they enable them to match their long-term liabilities while providing good yields and low correlation to traditional markets.
The lower capital charge allowed by the European Commission on these investments only made this interest stronger. The Solvency II regulation was first amended in September 2015 and subsequently in June 2017 to define which
criteria infrastructure projects and corporates would need to fullfil to benefit from these lower solvency capital requirements.
These criteria can be classified in the four categories:
• Infrastructure & location
• Revenues
• Investor protection
• Credit quality
ChallengesAssessing the eligibility of infrastructure investments comes with the following challenges:
• The criteria to be met are broad in scope
• Some of the criteria may be subject to interpretation
• The methodology employed should be formally documented
Infrastructure Investment Eligibility check under Solvency II
Infrastructure Investment Eligibility check under Solvency II
Deloitte LuxembourgGrand Duchy of Luxembourg
Tel.: +352 451 451www.deloitte.lu
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Advisory & ConsultingXavier Zaegel, FRMPartner | Financial Risks Leader+352 451 452 [email protected]
Thierry FlamandPartner | Insurance Leader+352 451 454 [email protected]
Lize GriffithsPartner | Real Estate Leader+352 451 452 [email protected]
Nick TabonePartner | Private Equity Leader+352 451 452 [email protected]
Francisco da CunhaPartner | Tax+352 451 452 [email protected]
Daniel CapocciDirector | Regulatory Strategy+352 451 453 [email protected]
Sylvain Crépin Partner | Financial Industry Solutions+352 451 454 [email protected]
Contacts
Infrastructure eligibility check in the context of Solvency II
Run the individual assessments
Prepare the Global Solvency II Report (or ISAE 3000 Quality Standards)
How to assess these points? How to justify this assessment?
Eligibility for lighter capital requirement
Our ServiceThrough our broad experience dealing with infrastructure as an asset class and the Solvency II framework, we provide a service which creates value at each step of the journey. For infrastructure investments we intervene:
• At the fundraising stage — to determinewhich investments will be able to benefitfrom the lower capital charge; and
• On an ongoing basis — to ensure anup-to-date assessment of infrastructureeligibility during the time of investment
For corporate infrastructure securities we propose to:
• At the origin — perform the analysisof the issuer and the securities
• On an annual basis — update the analysis
Three PillarsOur service is based on a proven methodology and articulated around three pillars:
• A deep understanding of the scopeand stakes of the eligibility criteria
• A thorough analysis of eligibilityfor each investment, prospectiveor realized; and
• An assessment of the whole portfoliothrough a Global Solvency II Report(an ISAE 3000 Quality Standardsreport can also be proposed)
Criterias to meet
RevenuesInfrastructure & location
Investor protection
Credit quality
