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22 February 2011
On January 31 2011 ISVAP, Italy's insurance regulator, approved Regulation 36/201, which offers guidelines on investments and assets to cover technical provisions.
Among other things, the regulation implements Sections 38 to 40, 42 and 191 of the Insurance Code with regard to assets permitted as cover for technical provisions, replacing previous ISVAP orders on the same matter. It applies to Italian insurance undertakings and branch offices of non-EU insurance undertakings.
The regulation introduces new elements (compared with previous ISVAP Orders 147/1996 and 2530/2007) concerning the guidelines on investments and qualitative requirements of activities that may cover technical provisions.
With reference to real estate investments, ISVAP has specified that:
Real estate investments may be included, in general, within the limit of 40% of the technical provisions to be covered.
As for investments other than in real estate funds, the category of permitted alternative investments (previously defined by ISVAP Order 2530 of July 3 2007) includes:
Investments in structured bonds that are linked to speculative real estate and non-real estate funds are permitted (whereas the previous regulations excluded bonds linked to speculative real estate funds).
Another innovation concerns the introduction of a set of specific, investment-related governance rules that provide for the adoption, by the board of directors, of a framework resolution to formalise strategic investment policy. The framework resolution would be subject to annual review and notification to ISVAP. The innovation is based partly on recommendations formulated by the International Monetary Fund in February 2006, as well as on recommendations by the Committee of European Insurance and Occupational Pensions Supervisors and the International Accounting Standards Board on investments and internal controls in the financial sector.
As stated in the public consultation report, the regulation aims to ensure the financial stability of insurance companies and the protection of insureds.
Insurance undertakings must comply with the new provisions within three months of the publication of the regulation in the Official Gazette.
For further information on this topic please contact Alessandro Corno or David Maria Marino at DLA Piper Italy by telephone (+39 02 80 61 81), fax (+39 02 80 61 82 01) or email (email@example.com or firstname.lastname@example.org).
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