The Austrian Financial Market Authority (FMA) has, with effect from 1 January 2014, revised the terms of its Regulation on Investments (KAVO; Kapitalanlageverordnung), making it easier for insurance undertakings to grant direct long-term loans to companies in the real economy without the need for additional security. According to conservative estimates, the Austrian insurance industry will be able to place loans worth up to € 4.2 billion at the disposal of domestic commercial borrowers.
However, in order to balance out policyholders’ security requirements, the insurance industry’s income targets and the need for investment by domestic companies, the KAVO attaches strict conditions to the award of such loans without additional security. The loans may only be issued to companies with strong credit ratings, a risk review process must be carried out at least annually, and the amount of individual loans as well as their total volume are subject to clearly defined limits within the insurance undertaking’s total allocation, with corresponding risk diversification. The business loans granted must also be given first-ranking priority in the borrower’s capital structure. Additionally, the borrowers must fulfil the criteria of a large-scale corporation.
By amending its Regulation on Investments in this way, the FMA is providing the Austrian insurance industry with an additional high-earning investment opportunity in the current low interest environment. It is also giving Austrian businesses access to a considerable volume of finance whilst at the same time upholding the requisite level of protection for policyholders.
Journalists may address further enquiries to:
Klaus Grubelnik (FMA Media Spokesperson)
+43/(0)1/24959-6006
+43/(0676)/882 49 516