Thanks to Solvency II,
private real estate funds looking to European insurers for
investment are in for an unpleasant surprise, a study by Preqin, a
consultancy specialising in alternative assets, has
indicated.
The study found that
more than 40% of insurers believe Solvency II capital requirements
will negatively impact their investments in private real estate
funds, while a further third say it will prompt a revision of
strategy.
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“Solvency II legislation will
have a dramatic impact on the real estate investments of insurance
companies based in Europe,” commented Preqin real estate data
manager Andrew Moylan.
“Those raising private real
estate funds are likely to receive far fewer commitments from this
group of investors, with many reducing or ending their allocations
to such funds.”
Indicative of the impact of
Solvency II, a survey of major European insurers by Preqin during
September and October 2010 found that 26% of respondents were
expecting to make fewer commitments to private real estate funds as
a result of the legislation. A further 16% said that Solvency II
was a contributing factor in their decision to no longer invest in
private real estate funds.
Preqin noted that 44% of
European insurance companies that invest in real estate have €1bn
($1.36bn) or more allocated to the asset class, with 23% allocating
€2.5bn or more.
Solvency II is scheduled to become effective on 31
December 2012.
