| LONDON, Sept 28
LONDON, Sept 28 Capital charges for insurers in
the European Union could be cut to encourage lending for
long-term projects and help boost the flagging economy, the
bloc's executive body said in a high profile policy shift.
The European Commission has written to the European
Insurance and Occupational Pensions Authority (EIOPA) to look at
cutting the amount of capital insurers must set aside to cover
some types of investments.
"European insurers are a potentially powerful financing
channel for long-term investment in growth and job enhancing
areas," Jonathan Faull, head of the commission's internal market
unit, said in a letter to EIOPA, dated Sept. 26, and published
on the executive body's website.
The Frankfurt-based watchdog derives its authority from the
commission which can endorse or reject its rules.
Faull said at the end of 2010 insurers had assets worth 7.4
trillion euros, equivalent to more than half the bloc's output.
Faull gave EIOPA until February to respond, given the
"urgency" of the need to lift economic growth by helping to fund
small businesses and infrastructure.
This could be done through securitisation of debt, a sector
which has been moribund since the 2007-09 credit crunch when
securitised debt based on U.S. home loans turned toxic.
The review of capital charges dovetails with the finalising
of new EU rules for insurers to cover risks on their books,
known as Solvency II.
EIOPA said on Friday said it was aware of the commission's
letter but it had yet to arrive.
"After we receive the letter, we will carefully examine it
and provide the Commission with our feedback," EIOPA said.
Banks welcomed the review, saying lower capital charges for
insurers would help kick start securitisation.
"We believe high quality securitisations will need to
continue to play an important role in the long term financing of
the real economy," said Rick Watson, head of capital markets at
the Association for Financial Markets in Europe, a banking
Cash-strapped governments have pinned their hopes on the
insurance sector to fund long-term economic development as banks
curtail their lending for big projects in response to tighter
bank capital rules.
For their part, insurers have been looking to diversify
their investments away from low-yielding government bonds and
into stable energy and infrastructure projects, but say they are
being held back by the Solvency II rules.