The Technical Report was published following a request by the European Commission earlier this year. In light of the current economic climate, EIOPA was asked to consider whether the capital requirements for certain long-term investments under Solvency II could be adjusted or reduced without threatening the prudential nature of the regime.
Instead of the current 7% capital charge for all AAA-rated securitisations, EIOPA has proposed that the charges for less risky issues be reduced to 4.3% and charges for riskier issues be increased to 12.5%. In order to identify less risky securitisations, EIOPA has developed a set of criteria based on the structure of the securitisation, the quality of the underlying assets, the underwriting processes and the transparency available for investors.
On the other hand, the Technical Report endorses the current capital requirements for several long-term investments under the Solvency II Directive including private equity, loans to SMEs as well as socially responsible investments.
EIOPA’s Technical Report can be accessed by clicking here.