Msci : Solvency II Real Estate Capital Requirements Retested »

London - March 7, 2017 - MSCI Inc. (NYSE: MSCI), a leading provider of research-based indexes and analytics, today published an update of its 2011 study aimed at reassessing the Solvency Capital Requirement (SCR) adopted by the European Insurance and Occupational Pension Authority (EIOPA) in 2010 for real estate investment portfolios held by European insurance companies.

The updated study confirms the original finding that the current SCR of 25% stipulated under the Solvency II Directive for investment in European real estate, including through funds, exceeds the most extreme 12-month downside values at risk documented for geographically diverse real estate investments across Europe.

The latest report adds six years of European investment market records, updates the capital risk analysis to December 2015, and includes data from five additional countries. As a result, the report offers a more comprehensive and robust basis for concluding that an evidence-driven pan-European property shock factor need be no more than 15%, confirming the findings of the 2011 study. In addition, new analysis undertaken for this update indicates that such a shock factor might be further reduced to 12% for broadly balanced European composites that exclude the U.K.

Commissioned by INREV in partnership with other industry associations, including AREF, BPF, BVI, IPF and ZIA, the new report was undertaken in anticipation of the EIOPA's stated commitment to review the SCR before the end of 2018.

Over the coming months, European policymakers will seek feedback on Solvency II in general and the current SCR arrangements in particular. This report should constitute an important information resource for the European real estate industry's responses.

Commenting on the report's conclusions, Dr Ian Cullen, Real Estate Advisory Director at MSCI, remarked that "the new data reinforces the conclusion, reached in our 2011 study, that a 15% SCR is a more accurate reflection of the available evidence of extreme downside risk across a broad geographical spread of European real estate investment markets over the past 15 years".

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