Insurers still committed to PE despite Solvency II

GPs on the fundraising trail will be relieved to hear that insurers are expecting to up their private equity commitments, despite the threat of strict capital buffer rules under Solvency II, which will impact larger insurers with any EU business

The private equity industry has long feared Solvency II will price many insurers out of allocating capital to the asset class, as it requires them to set aside €49 for every €100 invested under a default risk model.

But according to a survey from Blackrock 54 percent of 206 global insurers surveyed (including 103 European insurers) are either moderately or very likely to increase their investment in private equity.

“We have made a strategic decision over the last several few years to allocate a limited portion of our assets into a well-diversified mix of alternatives, including private equity,” Alfred Lerman, managing director, Prudential Financial, said in the survey.

However, not all insurers have such an optimistic outlook. Aktia Life Insurance recently told PEI's Research & Analytics team that Solvency II was the sole reason why it will not make any more private equity investments.

Another insurer, Groupama, sold Groupama Private Equity to fund of funds ACG Group in January, as part of an effort to sell assets not central to its insurance business.

And Lexington has been busy buying up many of Generali’s private equity fund interests, including Candover 2005, Cognetas Fund II, and Ironbridge Fund II, according to PEI's Research & Analytics team.

Solvency II, which was originally scheduled to go live in January 2014, will take effect from January 2016 after European Commissioner Michel Barnier said the original deadline date was “simply no longer tenable.”