Property industry urges inclusion in Solvency II review

The European real estate industry has reiterated its call to the European Insurance and Occupational Pensions Authority (EIOPA) to include real estate in its upcoming review of the capital requirements for insurance companies under the proposed Solvency II Directive.

Non-listed funds body INREV and 12 other national and pan-European real estate associations are adamant that real estate should be included in the review. 'Real estate is a major contributor to the European economy. Our industry accounted for 2.5% of total GDP in 2011 and it employs four million people. It would be negligent for EIOPA to ignore this important asset class,' said Jeff Rupp, director of public affairs at INREV.

The industry sees the review as an important opportunity for EIOPA to correct earlier calculations of the capital requirements for real estate investment. According to INREV and its partner organisations, these calculations were based on 'grossly inadequate' data, leading regulators to adopt too narrow a view of the risk profile of real estate.

In a letter to EIOPA in September, Jonathan Faull, director-general of the European Commission's Internal Market and Services, requested that the capital requirements for insurance companies investing in different asset classes be reviewed to ensure they do not impede much-needed investment and long-term financing of the real economy in Europe.

INREV and the supporting organisations only recently discovered that EIOPA plans not to include real estate in the review. According to INREV, this underlines the lack of transparency that has been at the heart of EIOPA's approach to establishing the capital requirements since the outset.

'Let's hope EIOPA doesn’t miss this vital opportunity to do the appropriate thing and include real estate in its review. The stakes are too high to miscalculate the capital requirements, for a second time,' said Rupp.