The Impact of European Initiatives to Promote Infrastructure Investments from the Insurance Industry's Perspective

Abstract

Against the background of seriously underfunded infrastructure and the risk of a resulting lower competitiveness of the European economic area, the European Commission aims to incentivize private and institutional investments in infrastructure, thereby laying one main focus on pension funds and insurance companies. At the same time, insurers seek attractive long-term investment opportunities with stable cash flows that help match their long-term liabilities as an alternative to long-term government bonds, which currently suffer from low interest rates. However, financing volumes are still low, indicating the existence of certain investment barriers. The aim of this paper is to discuss these major barriers to infrastructure investments with focus on the insurance industry along with the impact of several European initiatives that are intended to reduce barriers. We thereby provide numerical examples to study the impact of EIOPA’s latest amendments regarding infrastructure investments as well as credit enhancements through the EU2020 Project Bond and the Investment Plan for Europe Initiatives on solvency capital requirements.