Supervisory Statement on the Authorisation and Ongoing Supervision of (Re)insurance Undertakings Related to Private Equity (European Insurance and Occupational Pensions Authority)

Summary

• In the EU, 26 PE-related insurance undertakings managed a total of 260 billion euros in assets across 14 Member States at year-end 2023.p.2
• PE-related insurance undertakings accounted for 2.4 % of the European market as of the end of year 2023.p.2
• Supervisory review of proposed acquisitions under Article 58 of the Solvency II Directive must take place within a statutory timeframe of 60 working days.p.3
• Supervisory authorities are recommended to require at least a 3-years business plan from proposed PE acquirers during the authorization process.p.4

Key insights

1. PE ownership of insurance entities can provide investment diversification and capital access, but also creates strategic alignment risks with long-term policyholder commitments.p.2
2. Complex and multi-layered ownership structures involving entities in third countries pose significant challenges for effective supervisory oversight.p.6
3. PE investment strategies frequently shift asset allocations toward illiquid and non-rated private credit assets to generate higher yields.p.8
4. Material reliance on third-country reinsurance agreements can introduce counterparty default and liquidity risks while potentially weakening effective risk transfer.p.9
5. Balance sheet optimization techniques require rigorous justification and proper reflection within Best Estimate calculations and Solvency Capital Requirement models.p.10
6. High leverage structured at the parent company level outside the EEA can impact the financial soundness and independence of the underlying insurance undertaking.p.11
7. Proposed PE acquirers are strongly encouraged to engage in early dialogue with supervisory authorities prior to submitting formal acquisition notifications.p.11