Insurance companies’ position as the region’s largest long-term stable investors may be at risk, according to Insurance Europe.

The peak insurance and reinsurance body blames the Solvency II risk-based regulatory regime, to be implemented across the 27 European Union states by January 1 2016.

The warning comes after insurers’ investments in Europe grew last calendar year.

The region’s insurance industry had €8.5 trillion ($12.23 trillion) of assets under management, up 3.2% on 2012.

Insurance Europe Director-General Michaela Koller says insurers’ investments equate to 60% of Europe’s GDP. However, this position is under threat.

Under Solvency II, capital requirements will be aligned with companies’ underlying risks.

“While the industry welcomes the move to a risk-based regulatory regime… [it] will still require insurers to hold inappropriately high amounts of capital against their long-term investments,” Ms Koller said.

She claims this will make it more expensive for insurers to invest in long-term government and corporate bonds, and infrastructure projects.

“This could discourage insurers from making these vital investments, which would have a significantly negative effect on the European economy.”

Insurance Europe’s latest Key Facts booklet says Europe accounted for 35% of the global insurance market last year, followed by the US (30%), Asia (28%) and Oceania and Africa (3%).

Life insurance accounts for 60% of Europe’s insurance market, followed by property, casualty and accident (30%) and health (10%).