| Summary: | The recent global financial crisis, combined with regulatory changes in financial industries, has altered the financial landscape in terms of how financing can be achieved and the potential role of institutional investors. The potential role that insurers, particularly life insurers and pension funds, can play as long-term institutional investors has become a central topic of discussion in various fora. How this role develops will, in the long run, affect how firms obtain financing for their investments and ultimately lead to growth of the real economy. This article provides an overview of the evolving investment strategies of insurers and identifies the opportunities and constraints they may face with respect to long-term investment activity. The report investigates the extent to which changes in macroeconomic conditions, market developments and insurance regulation may affect the role of insurers in long-term investment financing. It concludes that regulation should neither unduly favour nor hinder long-term investment as such but place priority on incentivising prudent assetand- liability management with mechanisms that allow for a "true and fair view" of insurers' risk exposures. In risk-based solvency regulation, an asset's risk relative to liabilities is reflected in the capital requirements. JEL classification: G22, E22, F21, O16, Keywords: insurance, long-term investment, asset-liability management, risk-based capital
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