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Über dieses Buch

Fabian Regele examines the appropriateness of the current regulatory treatment and the general suitability of unlisted infrastructure equity investments for the investment purposes of insurance companies. The employed valuation model of a stylized infrastructure asset delivers sound economic results and is consistent with the typical J-curve effect of the cumulative cash flows of these assets. In the context of a portfolio optimization, the infrastructure asset improves the insurance company’s solvency situation by lowering its default probability and increasing its solvency ratio. In regard to the asset’s risk contribution, there is a time-variant occurrence of certain risk channels during its lifecycle that leads to substantial differences in the risk exposure of the insurance company.

Inhaltsverzeichnis

Frontmatter

Chapter 1. Introduction

Abstract
Infrastructure investments are frequently characterized as long-term investments generating stable cash flows, offering a good diversification potential as well as a sound protection against inflation. These attributes indeed might be very attractive for some institutional investors like insurance companies, as they promise a potential escape from the rising threats of the prevailing low-interest rate trap.
Fabian Regele

Chapter 2. Overview of the infrastructure asset class

Abstract
Despite the lack of a unique definition of infrastructure assets, its overall asset class principally comprises physical structures and networks that facilitate basic services for the existence, competitiveness and further development of both, an economy and a society. It is often claimed that the ideal infrastructure investment generates predictable, long-term and stable cash flows that show a low correlation with other investments available on the capital market, protects against inflation risk and exhibits some kind of monopolistic market characteristics. These properties, if existing in practice, appear to be the desired salvation for institutional investors like insurance companies, as they mitigate the jeopardy of the prevailing low-interest rate period.
Fabian Regele

Chapter 3. Regulatory treatment of direct infrastructure assets

Abstract
The consideration that decisions of the asset-liability-management of an insurance company cannot be made purely based on economic deliberations, but are also subject to tax, accounting and especially regulatory constraints, offers the potential for a wide spread of different and complex investment combinations within the company´s portfolio. In this sense, it is important to bear in mind that the European Union’s insurance industry is still the largest institutional investor in the EU.
Fabian Regele

Chapter 4. Optimal capital allocation and solvency capital requirements for the insurance company

Abstract
Infrastructure equity investments tend to be a profitable investment opportunity for large institutional investors like insurance companies, at least in a stylized manner (see chapter 2). However, as a result of the immaturity and heterogeneity of the infrastructure asset class and the prevailing lack of data, the overall performance of an insurance company´s portfolio investing in infrastructure equity assets is yet not clear, as well as the asset´s contribution to the overall riskiness of the portfolio and the resulting regulatory capital requirements to cover potential losses stemming from these risks. Furthermore, the question of an optimal asset composition of a portfolio investing in an illiquid asset like unlisted infrastructure equity still remains open under solvency requirements.
Fabian Regele

Chapter 5. Discussion of the results

Abstract
With respect to the results derived from the infrastructure asset´s model and the setting of the insurance company´s portfolio, there are several issues with a general impact on the quality of the inferred insights. The following discussion, however, only comprises the most important aspects.
Fabian Regele

Chapter 6. Conclusion

Abstract
The market for infrastructure investments can still be seen as immature and non-standardized, mainly resulting from the high degree of heterogeneity of the infrastructure asset class. However, the analysis of the market potential points out a large investment gap as well as four major trends that are likely to further raise the global need for infrastructure investments and emphasize the market´s general capability of providing promising investment opportunities for institutional investors in future.
Fabian Regele

Backmatter

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