EUROPE - INREV will continue to fight for a lower Solvency II shock factor for real estate, despite the European Commission maintaining its proposal for a 25% capital charge this week.

The organisation, which represents the European non-listed real estate funds sector, had hoped EIOPA - the regulatory body for European insurance companies and pension funds - would heed its calls to revise the threshold.

But on Tuesday, the European Insurance and Pensions Committee (EIOPC), which includes representatives from EU member state finance ministries, recieved an updated proposal, which still included the 25% market shock for property.

Jeff Rupp, director of public affairs at INREV, said lobbying efforts would now move to the European Parliament and that he was hopeful this new phase would be a more "open and transparent conversation" compared with the behind-closed-doors approach employed by EIOPA.

There had been indications EIOPA was considering research commissioned by INREV and carried out by Investment Property Databank (IPD) that argued for a capital charge closer to 15%.

But Rupp - speaking to IP Real Estate at INREV's annual CFO conference in Madrid - admitted he was not overly surprised by the decision to stick with the original threshold.

He said the opportunity to influence the incoming regulations had not ended, but rather had entered into a new phase, which would involve lobbying national regulators and finance ministers in Europe.

INREV is leading a coalition of trade bodies lobbying Brussels, including the European Public Real Estate Association, the Association of British Insurers, the British Property Federation, the Investment Property Forum, Germany's investment industry association (BVI) and the German Property Federation.

The main concern over requiring insurers to hold 25% in capital reserves against the value of their real estate investments is it might force them to withdraw from the asset class.

Marieke van Kamp, head of real estate investments at ING Insurance Benelux, told an audience at EXPO Real last months that applying a 25% capital charge to the insurance company's real estate investments would push it to liquidate its exposure to the asset class.

Large insurers like ING Insurance Benelux may be able to avoid the 25% shock factor by using internal risk models, but it is still unclear how many of these models - if any - will ultimately be accepted by the regulators and how long they will take to implement.

There are also concerns that not all national regulators in Europe - through which insurers will gain approval for internal models - will be able to cope with the task.

Also speaking to IP Real Estate in Madrid, Matthias Thomas, chief executive at INREV, said he was concerned there would be a number of "bottlenecks" in Europe as insurers sought to apply for internal models.

Critics argue that the 25% capital charge for real estate was arrived at through an analysis of the UK commercial property market, despite it being more volatile than continental European markets.

IPD research shows that a capital charge closer to 15% would better reflect the volatility of a pan-European real estate exposure.