A new equilibrium for mortgage investing under Solvency II
The revised Solvency II framework changes the capital treatment of Dutch residential mortgage investments. For insurers, both whole loans and securitised mortgage exposures become more attractive, creating a broader range of investment opportunities.
In this paper, we explore the key regulatory changes and their impact on capital efficiency, returns and portfolio construction. We compare whole loans, NHG-backed mortgages and several types of securitised mortgage exposures.
Our analysis shows that the reforms change the competitive landscape, but not the outcome. Whole loans remain a highly capital-efficient way for insurers to gain exposure to Dutch residential mortgages, while securitisations become a more relevant complementary allocation.