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Insurers cast doubt on ability to help EU investment plans

[LONDON] European Union regulators should ease capital charges on insurers to help them support the region's plan to boost growth through infrastructure projects, a senior executive at Italian insurer Generali said on Tuesday.

European Commission president Jean-Claude Juncker has presented a 300 billion euro (US$336 billion) plan to create more jobs, which requires private sector money to help fund projects.

But Alberto Minali, chief financial officer of Generali, Europe's third-biggest insurer sales, said new EU insurance capital rules from January 2016, known as Solvency II, would make it too pricey to invest in infrastructure.

"I understand Juncker but please, give us some help," Mr Minali told Reuters on the sidelines of an Economist conference.

Generali has 440 billion euros in assets, and just 5 per cent invested in infrastructure would total 20 billion euros. But the EU rules, which require insurers to set aside capital against various investments in case they turn sour, were unintentionally driving them to put money into government bonds and other traditional assets rather than the real economy, Mr Minali said.

"With the current Solvency II framework, it is not possible to allocate enough capital to support such investment," he said."I would say to reduce the capital charge on other asset classes, for example private equity."

Justin Excell, head of asset management at Swiss Re, also told the conference that capital charges were"way too high" to sensibly invest in infrastructure.

Nor was it a tradable asset class, Mr Excell said.

However, Carlos Montalvo, executive director of the EU's European Insurance and Occupational Pensions Authority, said Solvency II was not the main obstacle to infrastructure investment, despite some imperfections.

"The problem here is that the risk reward that you are getting is probably not the one you should be getting," Mr Montalvo said.

Mr Minali also urged regulators to delay plans for the first global capital standard for insurers from 2019, work on which overlaps with the roll out of Solvency II.

"Give us a break, one moment. Let's see the first round, second round of Solvency II, how the capital position of the group takes shape and then we can perhaps work on another standard," he told Reuters. "It's like climbing to the top of the mountain and there is another one there. Let's wait and let's take in the landscape for a bit."