Solvency II will make it easier for the insurance industry to invest in the infrastructure projects needed for Europe to return to economic growth, according to Michael Barnier, European commissioner for the internal market and services.
Speaking in the Netherlands on Friday, Mr Barnier said that, by removing absolute limits on the amounts that can be invested in certain categories, the new rules would give insurers 'greater freedom' to decide where they invest.
The capital requirements placed on insurers under the new rules would be reduced for those who diversify their asset portfolios, he said.
Under Solvency II, insurers offering policies with long-term guarantees will face a lower capital requirement if they invest in very long maturity bonds, rather than in short-term bonds.
'A very long-term investment of this kind could be used, for example, to fund infrastructure projects and thereby create growth,' he said. 'Thus, Solvency II allows asset-liability management, which is inherent to the insurance profession, to benefit the real economy.'
Mr Barnier said the European Commission was committed to ensuring Solvency II came into force 'as soon as possible'. He said he was 'hopeful' that political agreement would be reached on the Omnibus II Directive that underpins the legislation 'over the coming weeks'.
'However, if nothing happens, there is a major risk that the Solvency II Directive will not be officially amended in time, that is before 1 November 2012.
'That is why on 16 May 2012 we made a very targeted proposal to amend Solvency II on this point alone, in other words to change the date of implementation by the member states. Parliament and the council should, therefore, decide very shortly that Solvency II will apply from 1 January 2014.'
He added that, once Omnibus II had been adopted, the system would be put in place 'very quickly', enabling the commission to table implementing texts and draft technical standards to be drawn up.
Rhian Kelly, the CBI's director for business environment policy, welcomed Mr Barnier's recognition of the 'important role' insurers had to play as long-term investors in infrastructure.
'The insurance sector will be critical to funding much-needed upgrades to our infrastructure both in the UK and across Europe,' she said.
'The European Commission must ensure that it makes commercial sense for insurers to invest in infrastructure, including BBB grade assets.'
In his speech, Mr Barnier also revealed that schedule for the planned revision of the Institutions for Occupational Retirement Provision Directive, which applies to pension funds, had been put back.
The revised directive will now be tabled by summer 2013 and not before the end of the year, as previously indicated. 'Given the complexity and importance of this issue, and particularly the need for first-rate quantitative impact assessments, I have decided to take a few more months to finalise the revision,' he explained.
Mr Barnier reiterated his commitment not to simply introduce a 'Solvency II for pensions' by applying all the Solvency II rules to workplace pensions.
But he said: 'I believe it is important in regulatory terms to maintain a level playing field between insurance companies and pension funds when they supply similar and interchangeable products. I do not wish to penalise either of them.'