Following the global financial crisis, the European Insurance and Occupational Pension Authority (EIOPA) required European insurers to reserve capital equal to 25% of the market value of their real estate portfolios, to protect against a 1-in-200 chance of another catastrophic financial event. EIOPA is now reviewing those requirements.

Ian Cullen, Advisory Director, MSCI explained in a webinar on June 1, 2017, MSCI's recent update analysis suggests that a reserve closer to 15% is likely to be adequate for a broadly balanced European portfolio, and this could fall further to 12% for one that excludes the U.K., given the greater volatility of that market.

The implications of this research extend to the types and levels of data that are needed to fully address the issues of measuring and modelling extreme downside real estate risk. The webinar also therefore touched upon the data problems faced by insurance companies in building internal risk models and responding to regulatory requirements under Solvency II.