Infrastructure investments under Solvency II

Insurers operating under Solvency II (Delegated Regulation (EU) 2017/1542) face strong incentives to invest in eligible infrastructure investments through the solvency capital requirement (SCR) reduction for such assets. KPMG Luxembourg’s services cover the full value chain of asset eligibility services, FinDatEx Solvency II TPT compilation, and SCR market estimation. This article explains how infrastructure fund managers can leverage our services to foster fundraising, improve investor relationships and design optimal portfolio strategies.

Fast read

three reasons to pay attention

Infrastructure investments can benefit from capital charge optimization thanks to Solvency II’s favorable treatment when eligibility criteria are met. This potentially reduces the capital charge for equity risk from 49% to 30%, while spread risk may fall by 30-40%.
A documented eligibility assessment together with a properly completed Tripartite Template (TPT) enables asset managers to evidence regulatory compliance and supports insurers in claiming capital relief.
KPMG provides an end-to-end service covering infrastructure eligibility assessment, integration of the assessment into the TPT, and calculation of the resulting SCR impact. This reduces friction with prospective insurance investors and accelerates underwriting/allocation decisions.

Eligibility for reduced capital charges

Within the Solvency II framework, Articles 164 a & b define strict conditions for infrastructure investments to qualify for favorable regulatory capital treatment. This applies not only to direct investments but also those held in investment vehicles such as CIUs or SPVs.

Typical eligible assets include waste management, green/renewable energy, social infrastructure and telecom projects. Insurers are attracted to such investments as they not only deliver reduced regulatory capital requirements and increased portfolio stability but also align with their long-term liabilities and ESG objectives. Meanwhile, asset managers who want to attract these key investors need independent and credible eligibility assessments to enable the capital relief.

Assessments must follow strict operational procedures supported by detailed documentation, strong evidence and a clear audit trail as insurers must justify SCR relief to supervisors or auditors.

In terms of timing and lifecycle, the initial review can be done at investment inception or on-demand, mainly triggered by investors. Then, a lighter regular review is expected to identify any changes that might impact the assessment such as contractual structure modifications or refinancing operations.

The deliverable should indicate the concrete impact, by assessing if the asset is considered as a Corporate or Project investment and if it is through an equity holding or via a debt instrument. This will determine both eligibility criteria and the applicable Solvency II capital treatment for Equity & Spread SCR Market sub modules. Other sub modules, such as foreign exchange risks or interest rate risks, remain identical.

Corporate investments

involve stakes in companies that own or operate infrastructure. They are assessed at corporate level, considering legal structure, balance sheet exposures and the extent to which the firm's activities and risks are directly related to infrastructure services.

Project investments

by contrast, focus on a single project with ring-fenced cash flows and risks, and are assessed against criteria including legal structure segregation, contractual revenue streams and geographical localization.

Equity holdings

both for corporates and projects, will benefit from a lower stress factor, reducing it from 49% to 36% and 30% respectively. In addition, the symmetric adjustments cost will be reduced by 8% for corporates and by 23% for projects.

Below is a quantitative example where we have simulated an investment of EUR 100,000,000:

Debt instruments will see the cost of capital related to the SCR spread sub module decreased, on average, by 30% for corporates and by 40% for projects investments.

Examples

Information disclosure through Solvency II TPT reporting

The Solvency II TPT is a standardized excel-based format designed specifically for and by insurance undertakings to provide detailed information on portfolio holdings they invest in.

The TPT report also presents indicative position‑level SCR calculations for a broad spectrum of asset classes, including plain vanilla instruments, exchange-traded and OTC derivatives, and structured products. It is also designed to perform multiple levels of look-through, removing the operational difficulties of collecting accurate and detailed information to distribute to investors.

The report includes portfolio composition, issuer details, instrument characteristics, and, as a key piece of information, a dedicated field (item 132) related to infrastructure investment eligibility.

How KPMG can help you with the infrastructure assessment and TPT compilation

At KPMG Luxembourg, we support infrastructure fund managers across the full value chain – from eligibility assessment to TPT compilation and SCR impact analysis – helping reduce friction with insurance investors and accelerating allocation decisions.