Solvency II is a piece of EU law that will set insurers’ capital requirements, the amount they must hold against the risk of an investment.
Insurers are important long-term investors in private equity funds but they could be discouraged from choosing the asset class if they have to hold disproportionate amounts of capital.
Solvency II has encouraged the introduction of advanced internal control frameworks. In response to the lack of guidance on this subject for private equity practitioners, Invest Europe – in cooperation with a special working group - evaluated the feasibility of advanced risk measurement for private equity and came up with a set of guidelines for internal model-based risk measurements for private equity as part of Solvency II.
The Invest Europe Risk Measurement Guidelines are available here.