EU unveils plans for a ‘capital markets union’

The EU has unveiled a new plan to encourage companies to tap difference sources of investment.

The European Commission says firms rely too heavily on banks for funding.

It reckons they should explore alternatives, such as venture capital.

The end goal would be to create a single European market for raising capital.

“In the US, SMIs get about five times as much funding from the capital markets or non-bank financing as they do here in the EU. And if our venture capital markets were as well developped as they are in the US companies could have raised an extra 90 billion euros over the past five years,” said Britain’s Jonathan Hill, the EU commissioner for financial stability.

Read more: EU unveils plans for a ‘capital markets union’ | euronews, Europe

European Economy: Future of SMEs: Europe’s economic powerhouses

Small and medium businesses (SMEs) are the heart of Europe’s economy but some have not survived the financial crisis and many others have had to innovate to have any kind of a future. Real Economy travelled to Italy to meet some of those who have risen to that challenge, often tapping into new sources of financing when lending from the banking sector was drying up.

There are some 21 million SMEs in Europe, supplying about 85% of jobs. All that entrepreneurship allows Europe to control one fifth of world trade and that’s why it’s so important to understand these economic powerhouses and why they are so critical.

It works something like this: Jack has a micro-sized glass making company, which employs less than 10 people and makes around two million euros a year. Jack then supplies his glass to Greg’s small company which makes mosaics – Greg has earnings of less than 10 million and fewer than 50 employees. Greg then sells his mosaics to Linda who is a medium-sized mosaic and tile seller. She has 250 people or less on her payroll and her business makes 50 million euros.

However, if any of them are taken over, linked to or partnered with a large company, or are 50% owned by universities or local authorities they may no longer be considered SMEs. Jack, Greg, Linda and others like them create 2 out of every 3 jobs in Europe. Companies like theirs make up 9 out of 10 businesses in Europe, creating the value added that drives our growth.

Read more: Future of SMEs: Europe’s economic powerhouses | euronews, real economy

The Netherlands: Crowdfunding – Dutch investors – where to go?! - by Coen Barneveld Binkhuysen

Crowdfunding is growing exponentially in the Netherlands. Although the Dutch market has not yet reached the astronomical levels of the United States and the United Kingdom, many people have heard about the phenomenon and are intrigued by this potential alternative investment opportunity.

While the Dutch market speaks a lot about crowdfunding, it is less familiar with the term p2p-lending (it is commonly available though).

As this article covers investments in loans, convertible subordinated loans and equity, I will use the general term crowdfunding instead of p2p-lending.

In the first 6 months of 2015, almost 50 million Euro was raised via crowdfunding, which is double the amount raised in 2014.

There are over 80 crowdfunding platforms active in the Netherlands, which makes it difficult for potential investors to gain an overview of the viable available investment opportunities.

In general, crowdfunding platforms in the Netherlands offer the option to invest in loans, subordinated convertible loans and equity (besides donations and the purchase of products). Each of these different investment options has benefits and drawbacks in terms of cash flow, risk and the potential upside can vary significantly:

Loans provide a direct cash flow to the investor as loans are usually repaid in monthly instalments. Loans only have a limited potential upside, maximized at the offered interest rate. Due to the monthly repayments, the risk decreases every month. Most crowdfunding platforms determine the interest rate based on the envisaged risk. As far as I am aware, there are no platforms active in the Netherlands that provide the option to “bid” on loans in auctions.

Read more: Crowdfunding – Dutch investors – where to go?! | P2P-Banking.com

Solvency II: A new risk-based regime for Europe

From 1 January 2016 Europe’s insurers will be governed by a new set of rules called Solvency II. These rules aim to ensure that policyholders throughout the European Union enjoy the same level of protection, no matter where they buy insurance. 

Europe’s insurers have played a significant role in the development of these new rules and welcome their aims. However, insurers remain concerned that certain elements within Solvency II will produce unintended consequences, which could ultimately harm both insurers and their policyholders.

For example, the new rules unnecessarily increase the cost of making long-term investments. This reduces insurers’ ability to make such investments, which are crucial for providing good returns to our policyholders, and which underpin economic growth and stability in Europe.

Through engagement with policymakers and supervisors, however, Insurance Europe is working to ensure that the rules are adjusted so that Solvency II works as planned and unintended consequences are avoided. It is hoped that some of these improvements will be included in actions related to the Capital Markets Union project, and that others as part of Solvency II's reviews processes.

Insure-Digest

Netherlands launches billion-euro small business fund - by Janene Van Jaarsveldt

Small and medium sized enterprises in the Netherlands now have a new opportunity to get a loan – the Netherlands Investment Institution has opened its Commercial Loan Fund, which has about 1 billion euros available to issue loans to SMEs.

Half of that money comes from six institutional investors – Aegon, ASR, Pension Fund Metal & Engineering, Pension Fund PGB, NN and the European Investment Fund, NOS reports. These investors contributed a total o 480 million euros. Banks contributed the other half. The Fund was established last year with the help of the Ministry of Economic Affairs. It aims to encourage investment in SMEs by bringing supply and demand of loans together.

According to the Netherlands Investment Institution, NLII, up until now there were a number of barriers standing in the way of SMEs getting loans. For example, the loans the companies need are too small to be of interest to institutional investors. Or banks being unable to approve a loan because they have too much money outstanding with a company or sector.

The NLII wants to resolve these problems by bundling the loans together, making it more attractive to institutional investors, and making half of the money come from the fund and half from the banks, giving banks more room to lend money. The fund gives loans of between 5 million and 25 million euros, with banks contributing an equal amount. The investors investing in the Fund receive a market interest rate on their investment.

“We are enabling entrepreneurs to make use of a new and additional funding channel worth about 1 billion euros. At the same time, institutional investors re getting a new opportunity to invest directly in the Dutch economy through the Commercial Loan Fund”, according to NLII director Loek Sibbing.

Read more: Netherlands launches billion-euro small business fund - NL Times

Car insurance tailored to your usage (UBI)

The ability to bring internet connection to nearly every type of consumer device will have huge implications for the insurance industry over the next five years. Insurers looking to cut costs, improve business practices, and better assess clients' risk levels, will increasingly invest in the Internet of Things (IoT).

Some auto and health insurers are already offering a new type of insurance — usage-based insurance (UBI) that uses IoT devices to track clients' activity and offer discounts or rewards for healthy and safe behavior. We expect 17 million people will have tried UBI auto insurance by the end of this year.

The usage based insurance market more closely aligns driving behaviors with premium rates for auto insurance. The UBI program mainly includes On-Board Diagnostics (OBD) to monitor the driving habits, pay as you drive (PAYD), and pay how you drive (PHYD).

At present, usage based insurance market has been popularized in Europe and the United States, where the insurers like Allianz, Insure The Box, Progressive, Allstate, and Desjardins Insurance have developed UBI business and made some profits. Meanwhile, the telematics providers in different countries including Baseline Telematics, Masternaut, MyDrive Solutions Limited, Octo Telematics, and TomTom Telematics have continuously optimized OBD devices to assist insurers with accurate usage based insurance market pricing.

Insure-Digest

Dutch Health Insurance System too complicated and expensive say 58% of the Dutch

Most of the insured in the Netherlands are fed-up with the present health-care system. They find the system too complicated and too expensive.

 "It is like a jungle out there when you are trying to find out how the insurance system works and what is best for you and your family". "Lots of confusing choices make it very difficult to figure out”,said working mother.

Recently the marketing organization Pricewise reported that 58 percent of the people insured under the Dutch system today would rather prefer to go back to the old national health-care program if they had the choice.

The choices need to be made simpler, more limited, according to most of the people interviewed

Unfortunately, when the month of November rolls along again and insurance companies in the Netherlands mail out their annual multi-choice policies to customers, it will once again be as confusing as ever for  customers to figure out which company to choose from offering the best coverage for their family and budget.

 Insure-Digest