Insurance and reinsurance undertakings must invest all assets in accordance with the prudent person principle and only in assets and instruments whose risks can be properly identified, measured, monitored, managed, controlled and reported. All assets, including those covering the Minimum Capital Requirement and Solvency Capital Requirement, must be invested to ensure the security, quality, liquidity, profitability and localisation necessary for availability. Assets held to cover technical provisions must be appropriate to the nature and duration of liabilities and invested in the best interests of policyholders and beneficiaries; conflicts of interest must be resolved in those best interests.

Where investment risk is borne by policyholders, technical provisions must be represented as closely as possible by relevant units or by assets that closely replicate the reference value; guarantees attached to such benefits require appropriate asset coverage. Derivatives are permitted for risk reduction or efficient portfolio management; investments not admitted to trading on a regulated market must be kept to prudent levels; portfolios must be diversified to avoid excessive issuer, group or geographic concentration. Investment strategy must take account of macroeconomic and financial developments, sustainability risks and, at the request of the supervisory authority, macroprudential concerns; supervisory consideration of group‑level assessments applies where relevant.