EU to relax rules for insurers buying listed real estate

The European Commission is to bring in a new regulation which will free up the insurance sector to invest more heavily in listed real estate. The EC is set to amend reserve capital requirements on Saturday (8 June) for insurers investing in equities, from 39% to 22% for long-term investments.  These changes will make it easier for insurers to invest in listed real estate – which is now almost half as cheap as before by capital requirement standards. Currently, each time an insurer makes an equity investment – acquiring an ownership interest in an entity that holds property – they need to hold back funds on their balance sheet (amounting to 39% per deal).  Tobias Steinmann, director of public affairs at EPRA, said: “Our insurance members talked to us and said they are invested in the real estate sector, but they will invest more if these regulations are softened. They thought the situation was harsh.” The capital requirements were first introduced under Solvency II, to make sure that institutional investors have enough capital in reserve in order to remain liquid when investing in “risky” assets. Solvency II is a set of rules governing how insurers are funded and governed, introduced in 2016. It was more than 10 years in the making and more than 3,200 pages long. However, an amendment to reduce this to 22% was put forward on 8 March by the EC after lobbying from EPRA, among others. The European Public Real Estate Association said that investing in listed real estate is equally as risky as investing directly in a specific property. However, despite this, capital requirements for direct investing stand at just 25%. To send feedback, e-mail anna.ward@egi.co.uk or tweet @annaroxelana or @estatesgazette