Solvency II reforms could drive European insurers to allocate up to 5% to CLOs

Partner Cameron Mitcham spoke with Structured Credit Investor about the potential impact of upcoming Solvency II reforms on the European collateralised loan obligation (CLO) market.

The reforms, set to take effect on 30 January 2027, will reduce capital requirements for certain securitisation exposures, potentially encouraging greater investment from European insurers.

Cameron noted that even a modest reallocation of insurer capital could significantly boost demand for senior CLO tranches and improve secondary market liquidity. However, he cautioned that the benefits will be more pronounced for AAA-rated tranches, while capital treatment for other investment-grade CLO tranches will remain challenging.

He also highlighted that the pace of insurer participation will depend on factors including liability profiles, solvency ratios, operational infrastructure and access to specialist investment expertise.

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