How European insurance industry partnerships can support the EU’s drive toward a climate-neutral continent and economic recovery.
As Europe emerges from the pandemic and begins to unleash the potential of the NextGenerationEU funds, there are good reasons to be positive. A shared commitment to drive growth, prosperity and build a future that puts sustainability and digitalization at its heart.
To support in this critical moment, the European insurance industry has a key role to play — with €11 trillion of assets under management and Generali alone accounting for over €660 billion — we have enormous investment firepower and sound expertise as seasoned institutional investors.
Our investments and activities can drive transformation in key sectors such as digitalization of our economies and societies, infrastructure, energy and health. As investors, we can channel significant flows of capital by accompanying a more sustainable and inclusive way of creating, manufacturing and selling products and services. Furthermore, insurers can support the EU’s ambition to make Europe the first climate-neutral continent.
With €11 trillion of assets under management and Generali alone accounting for over €660 billion — we have enormous investment firepower and sound expertise as institutional investors.
However, to do so, it is key to ensure the right regulatory environment that can stimulate investments in long-term and sustainable projects.
The Solvency II Directive – which is currently under review — is a key instrument for freeing up capital and directing it towards projects in line with the Commission’s political agenda, such as the Green Deal, Capital Markets Union and, more generally, long-term investments that can support the economic recovery. It is a well-performing regulatory and prudential framework, but we think that more can be done to unleash its full potential and allowing for insurers to play their role as being key actors of the EU’s recovery.
The right framework should be found to allow for the EU’s insurance industry to remain competitive and continue offering well-designed and affordable long-term protection solutions to our citizens and businesses.
As risk-takers and investors, the industry plays a double role in managing sustainability-related risks, but also making sure that these are adequately priced.
Insurers will also play a key role in the green transition and ensuring that our economies reach net-zero by 2050. As risk-takers and investors, the industry plays a double role in managing sustainability-related risks, but also making sure that these are adequately priced. In this regard, the Commission’s proposal to task EIOPA to explore whether a dedicated prudential treatment of exposures related to assets or activities associated substantially with environmental and social objectives is welcomed.
This is why we have elaborated a proposal – within the Solvency II framework – to treat ‘Green Bonds’ as a specific asset class, in light of their different nature and related risks compared to other types of bonds.
The idea is to consider separately ‘Long-term Green Bond Investments’ with decreasing capital charges for longer holding periods. This would prevent in-and-out trading, thus favoring a long-term holding.
2020 was a landmark year for Europe. In the face of the crisis, member countries came together to create an historic and innovative settlement. 2021 is time for delivery. As one of Europe’s leading financial institutions, Generali is ready to engage in public-private partnership that can help boost the recovery and make the European economy stronger, more resilient and more sustainable for many years to come.
This article was originally shared by Politico.
