The real estate industry should respond to the European Insurance and Occupational Pensions Authority (EIOPA)’s consultation on its new pensions directive, says PwC.
European pension funds could face capital charges of 25% under the proposals published last Friday, equivalent to those that insurance companies face under Solvency II.
John Forbes, real estate partner at PwC, said: “Of concern to the real estate industry is that the solvency capital requirement (SCR) in this quantitative impact study (QIS) mirrors that proposed for insurers under Solvency II. In particular, the property shock provisions used in Solvency II that assume a 25% fall in real estate values are replicated in the new proposals.
“The application of this level of market shock would be as unappealing to defined benefit pension schemes as it would be to life insurance companies. Both groups are major investors in real estate as an asset class.
“It is important that the real estate industry responds to this consultation document, but also that it continues to make its voice heard over areas of uncertainty in Solvency II such as the treatment of real estate lending. The regulator has made it clear that the same calibration is intended to be used in both. Any deficiencies in Solvency II that remain uncorrected are therefore likely to also apply to pension schemes.”
sophia.furber@estatesgazette.com
