Solvency II changes make listed real estate more attractive for insurers

Changes to the EU’s Solvency II regulations are making listed real estate a more appealing investment for insurance companies compared to direct investments in commercial property. 

EU

This regulatory shift could lead to a significant change in how insurers allocate their capital, given that they manage an estimated €2.3 tn in assets within EU member states. The new regulations must be implemented by January 2027.
Under the revised Solvency II rules, insurance companies in EU countries will now face a 22% capital charge for their long-term equity holdings, including listed real estate. This is a considerable reduction from the previous 39% rate for equity investments and is even lower than the 25% charge applied to insurers' direct property investments.
According to estimates from the insurance consultancy Milliman, these Solvency II changes, which were finalized in late 2024, could potentially drive an additional €100 bn into the listed property sector over time, assuming a 5% portfolio allocation to the sector. Research from the European Public Real Estate Association (EPRA) highlights the benefits of including listed real estate in investment portfolios, citing a case study from Norges Bank Investment Management.
The EPRA has been advocating for changes to the Solvency II capital charge rules since 2019, as they have historically discouraged major institutional investors from investing in the listed real estate sector.