Mario Draghi’s 400-page white paper, released last summer, clearly addressed a range of structural issues hindering European competitiveness. With volatile markets in early 2025 reshaping the established global order, the motivation to ignite the engines of growth in Europe has increased dramatically. Life insurers are uniquely positioned to help drive that competitiveness – but unless they are given the keys and are operationally ready for action, Europe risks leaving this opportunity firmly locked behind a closed door.
A key focus for both Draghi and, subsequently, EU policymakers is Europe’s severely underdeveloped securitisation markets. The EU has proposed overhauling the debt securitisation rules introduced in the wake of the 2008 financial crisis, in an effort to encourage lending for domestic projects.
Risk vs reward
On 18 July, Brussels published a draft delegated act aimed at amending Solvency II regulations. Put simply, policymakers believe the balance between risk management and investment freedom has swung too far. There is a view that by lowering the prudential requirements attached to these investments on insurers’ balance sheets, greater levels of investment in the European economy can be unlocked.
Securitisations are essentially a means for banks or other lenders to package up many smaller loans or cash-generating assets into larger, tradeable securities. The US has a thriving securitisation market, where life insurers play an important role in providing funding to domestic businesses. Europe? The disparity is telling. Between 2018 and 2024, data centre securitisation issuance in the US generated $34.7 billion, compared with a total of €0 in the EU. US solar securitisation in the same period generated $23 billion, whereas the EU figure was just €230 million.
The missing lender
The scale of the issue is clear. Securitisation simply has not gained traction in the EU as a means of driving growth and releasing equity from lenders with capital to deploy.
The big lender missing from this market? Life insurers. While the European life sector currently holds only 0.33% of investment assets in securitisations, US life insurers hold 17%. This is not an issue of scale – the industries are similarly sized. It is an issue of availability and regulatory constraints on insurer participation.
Empowering insurers
Solvency II is a vital regulation that underpins trust in the European insurance industry, helping to protect against potential insolvencies and ensuring responsible risk management. However, it currently goes too far in restricting investment in securitisations, imposing punitive capital charges that come at the expense of growth. This is particularly evident in the case of non-simple, transparent, standardised (non-STS) securitisations, those that are more bespoke, which can attract extremely high capital charges that deter insurers from allocating capital to them.
Securitisations are not inherently riskier than other products. EU-originated securitisations, for example, performed relatively well during the financial crisis. Nevertheless, the reputational damage to securitised products across the board was significant, and continues to hang over the market nearly two decades later. These changes to EU regulation cannot come quickly enough to unleash a fresh wave of investment – but are insurers themselves ready?
The operational challenge for insurers
The critical question is whether the European insurance industry is prepared to unleash this capital when the regulatory shackles are loosened. That depends largely on how sophisticated they are as investors – not just in the front office, but operationally as well.
Securitisations require significantly more operational oversight and specialised data management than traditional assets such as public equities or corporate bonds. This includes the need for granular performance data on the underlying loan pools, such as delinquency rates or prepayment speeds. Moreover, cash flow modelling requires constant monitoring and is more difficult to predict.
The data types involved are also markedly different. Unlike corporate bonds, which benefit from standardised and regular financial reporting, securitisations rely on trustee reports, loan servicer data, and ratings agency surveillance – all of which vary widely in format, frequency, jurisdiction, and originator.
This complexity demands more sophisticated risk management capabilities. Insurers must undertake in-depth modelling of pool-level risk factors, account for greater liquidity risk due to limited secondary market activity (relative to equities or corporate bonds) and manage variable duration profiles resulting from prepayments.
Europe cannot afford to squander this moment. The regulatory keys are finally being offered – but only insurers with operational readiness will capitalise on the opportunity to drive European competitiveness.
