We would like to request EIOPA’s clarification on the application of the Long-Term Equity (“LTE”) treatment under Article 105a of Directive 2009/138/EC, as amended by Directive (EU) 2025/2, to equity investments made through an index-tracking exchange-traded fund (“ETF”) investing in EEA listed equities.

As we understand the amended framework, Article 105a(2) provides that, where equities are held within European long-term investment funds or within certain types of collective investment undertakings identified in the delegated acts as having a lower risk profile, the conditions laid down in Article 105a(1) may be assessed at the level of the fund rather than at the level of the underlying assets.

In addition, Article 171d(2) of Commission Delegated Regulation (EU) 2015/35, as amended, identifies the types of collective investment undertakings and alternative investment funds that are considered to have such a lower risk profile for these purposes. These include European long-term investment funds, qualifying social entrepreneurship funds, qualifying venture capital funds, and closed-ended alternative investment funds managed by authorised EU AIFMs with no leverage calculated in accordance with the commitment method.

Our question relates to an ETF tracking and EEA equity index which does not fall within any of the categories listed in Article 171d(2). On that basis, and consistently with recital 26 of the amending Delegated Regulation, we understand that the conditions in Article 105a(1) should not be assessed at the level of the ETF as a whole, but rather by applying a look-through approach to the underlying equity exposures.

The ETF considered for this purpose would have the following characteristics:

- it tracks a broad EEA equity index;

- it is physically replicated and invests only in EEA listed equity instruments;

- the composition of the index is relatively stable over time, as it is made up of established companies which tend to remain in the index over long periods; - changes in the fund’s holdings are mainly driven by periodic index rebalancing and adjustments to portfolio weights, rather than by short-term discretionary trading decisions;

- the insurance or reinsurance undertaking would identify the relevant exposure separately, include it within a dedicated long-term equity portfolio, and manage it in accordance with a long-term investment management policy consistent with Article 105a(1);

- the undertaking would assess its ability to avoid forced sales of the relevant equity exposure over a five-year horizon, both on an ongoing basis and under stressed conditions, in accordance with the amended Delegated Regulation. 

In particular, we would like to understand whether an insurance or reinsurance undertaking could, subject to appropriate evidence, governance and documentation, consider the relevant underlying EEA listed equity exposures for LTE treatment where it can demonstrate that the conditions in Article 105a(1) are satisfied at the level of those underlying exposures, including the separate identification and management of the relevant exposure, the existence of a long-term investment management policy, appropriate diversification, and the ability to avoid forced sales over the required horizon. 

Conversely, if EIOPA considers that certain features inherent to an index-tracking ETF, for example periodic index rebalancing, changes in the relative weights of the underlying holdings, or any other feature of the fund structure, could affect the availability of such treatment even where the underlying assets are EEA listed equities and the undertaking applies a look-through assessment, we would be grateful if EIOPA could indicate which specific features would be relevant to that conclusion.