The S&P Solvency II Capital Efficiency Corporate Bond Index seeks to track the performance of qualifying global corporate infrastructure bonds that meet the criteria under Solvency II. The index utilizes an independent third-party assessment to determine eligibility for each security.
- What is Solvency II? The Solvency II regime provides a framework for insurance providers in the European Union (EU). This also applies to global insurance regulators that adhere to the Solvency II framework. Like the Basel framework for banking institutions, it focuses on three pillars to assess capital requirements, set risk management procedures, and perform supervisory reporting for adherence to the regime.
- To receive preferential capital requirements, securities must qualify for capital relief. What are the criteria for qualifying for capital relief?
The primary requirements include the following.
- The entity “provides or supports essential public services.”
- More than 75% of its revenues come from infrastructure investing.
- The level of output or the usage and price are contractually fixed.
- The main payers are entities with an External Credit Assessment Institutions (ECAI) rating and a credit quality step of at least 3.
- The investing entity should be able to hold the investment to its maturity.
- There is diversification in terms of location.
- A substantial majority of the revenues come from infrastructures located in the Organisation for Economic Co-operation and Development (OECD).