Recital 25

(25)As underlined in the Commission’s Communication on a Savings and Investment Union ⁸ , institutional investors, such as insurance and reinsurance undertakings, are uniquely placed to invest with a long-term perspective and support the equitisation of Union firms in priority areas, including defence, research and innovation or the green and digital transitions. Encouraging equity financing is central to strengthening the Union’s economic resilience and competitiveness, notably by enabling innovative firms to access stable and patient capital. Article 105a of Directive 2009/138/EC lays down a preferential capital requirement applicable to long-term equity investments. Specifically, paragraph 1, point (d), of that Article provides that, to benefit from the preferential treatment, insurance and reinsurance undertakings should demonstrate, to the satisfaction of the supervisory authorities, that they are able to avoid forced sales of equity investments for a period of five years, on an ongoing basis and under stressed conditions. To ensure that this requirement is applied in a consistent manner, the approaches to demonstrate an undertaking’s ability to avoid forced sales of equity investments should be specified. In addition, to avoid unjustified administrative burden and to accommodate differences in the complexity of undertakings’ risk profiles, insurance and reinsurance undertakings should be allowed to select the most appropriate approach from several methods, depending on their business model and sophistication. That can increase the usability and effectiveness of the preferential treatment across diverse categories of undertakings. However, to prevent arbitrary or opportunistic switching between approaches over time, it is necessary to set out clear safeguards and supervisory monitoring requirements, ensuring consistency, transparency, and supervisory convergence, while maintaining prudent risk management and policyholder protection.