The true average volatility level for real estate across Europe is no more than 15%, he said.According to the agreed text of the directive, the standard model charge can be substituted by an internal model based on the actual volatility of an insurer’s property portfolio after approval by national regulators.But in practice, devising this tailored solvency requirement is a very expensive option only open for big insurers, according to Rupp.“Large companies can do that to avoid the 25%, but smaller companies find that quite hard to do, and the cost is a deal breaker,” he said.However, negotiators from the European Parliament, member states and the European Commission did strike a compromise that provides some flexibility in calculating how much capital insurers must hold to protect against market swings, INREV said.The final agreement included a 65% across-the-board volatility dampener that takes account of the cash insurers need to set aside to meet their liquidity needs in case their portfolio value decreases.The cash needed for the whole portfolio is calculated and then multiplied by 65%.This dampener effectively reduces the 25% standard model charge for real estate, but Rupp pointed out it would also apply to other asset classes.“At the end of the day, real estate is still in a relatively disadvantaged position,” he said.John Forbes, an independent consultant specialising in real estate, said following the tripartite agreement on Omnibus II, there were still significant areas of uncertainty to be resolved in the Solvency II regime.The European Insurance and Occupational Pensions Authority (EIOPA) now has the task of finalising the level 2 regulations that will implement Solvency II, he said.“Apart from the uncertainty in the regulation itself, the real estate industry faces a lack of clarity as to how individual insurance companies will implement the changes necessary,” Forbes said. Investment managers now also need to establish what information their insurance clients need for their capital charge modelling, he said, adding that insurers were only just beginning to work out the answer to this question.Melville Rodrigues, partner at CMS Cameron McKenna, said there were elements of the announcements that real estate fund managers would not welcome, and they should continue to monitor Solvency II developments.“For instance, managers may need to adjust their reporting practices and comply with the look-through principle,” he said. Real estate has been disadvantaged compared with other asset classes in the Omnibus II agreement reached by EU institutions on Wednesday night because the solvency capital charge for insurers on property holdings is too high, according to INREV.The Omnibus II directive, which updates and makes changes to the EU’s Solvency II risk-based regulatory regime for the union’s insurers, retains the standard model 25% charge for real estate holdings, said INREV, the European Association for Investors in Non-Listed Real Estate Vehicles.Jeff Rupp, director of public affairs at INREV, said: “The bad news is the 25% standard change, which is supposed to reflect the volatility of portfolios across Europe – but which, research has shown, overstates it.”The association has argued that the data used to come up with the figure of 25% to represent the volatility of real estate – the IPD UK monthly index – does not include data from Continental Europe or residential property, and so overstates the volatility of the asset class for Europe as a whole.
Press Association Former Gloucester boss Davies has tipped Ireland’s new forwards coach to handle his quickfire transition to the international arena. Easterby left his head coach post at the Scarlets after just two years at the helm to replace John Plumtree in boss Schmidt’s backroom staff in July. “Joe Schmidt is similarly single-minded, so I think it will work well. “When I was defence coach at the Scarlets Simon was struggling with a couple of long-term injuries, so he started to work a little bit alongside me. “It was very clear, very early on that he had all the qualities and abilities to make a top coach. “He’s passionate about success and he always drives himself hard. “So he’s used those qualities to help motivate and develop players under his watch.” Former British and Irish Lions flanker Easterby won 65 caps before switching to coaching with the Scarlets, eventually succeeding Davies as head coach at the Welsh region. Just two years into his stint as boss in west Wales, Ireland and head coach Schmidt came calling, but Davies said any inexperience will not hinder the 39-year-old’s progress. Easterby faces his first serious international challenge next month as Ireland take on South Africa, Georgia and Australia in the autumn’s Guinness Test series. Former Wales attack coach Davies said the meticulous Schmidt will not have taken any gamble in adding Easterby to his staff. “Simon’s still very young and relatively inexperienced, so it’s a great opportunity for him, he’ll learn a lot at the real sharp-end of the game,” said Davies. “But he’s capable. He’ll manage it, deal with it and learn quickly. “And I’m sure his career will blossom even further. “Joe is very much a thinking coach, he doesn’t always come at things head-on – he thinks laterally. “He’s very bright and I think this is exactly the kind of decision I would expect him to make, he’s thought laterally about who can do the job, who is respected within Ireland, who can he maybe help develop a little bit further, and who will he have trust in. “And when he’s looked at all those qualities Simon fits the bill very well. “And I think he’ll work hard with Simon to turn him very quickly into a top coach. “It has come early in his career, but when you’ve got someone who thinks as laterally as Joe, then it makes perfect sense.” Davies handed Easterby his first steps into coaching at the Scarlets and believes the ex-Ireland flanker exudes the same qualities that have marked out Schmidt’s own impressive career. “I was just starting my own coaching period when Simon joined us from Leeds,” Davies told Press Association Sport. “He was a very dedicated young man, very focused and ruthless in his pursuit of being the best. “Simon was an exceptional player for the Scarlets and Ireland and very, very disruptive; very much the modern-day rugby player, especially in the contact area. “And he would do anything for his team-mates. “He was very effective in what he did. “So he always had that and he’s always had that mentality. “He’s taken that ruthless focus forward and used it in his transition to coaching. Simon Easterby boasts the “ruthless focus” to thrive in Joe Schmidt’s Ireland set-up, according to his Scarlets coaching mentor Nigel Davies.