UK insurers urge new public-private schemes to deploy £100bn investment

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UK insurers have called for new public-private partnerships to help funnel a promised £100bn of investment unlocked by post-Brexit regulatory reforms into green infrastructure projects.

Ministers have promoted the Solvency II reforms, which ease capital rules and make other changes to EU-inherited regulation, as a key “Brexit dividend”.

The reforms are intended to unlock extra investment by UK insurers in domestic infrastructure but the industry has warned that a lack of investable projects could hinder these efforts to expand financing.

The Association of British Insurers’ Investment Delivery Forum, set up to facilitate the promised investments, on Monday said new public-private partnerships that use taxpayer funds would reduce risks.

In an interim report, the body said these partnerships would smooth out investment returns, to help projects achieve an investment-grade credit rating and make them a better match for insurers’ long-term liabilities.

“[The current regulatory approach] is rightly in the interests of policyholders — to keep their money safe — but it narrows the funnel of investable projects,” the report stated.

According to figures published by the forum in November, the UK needs to invest more than £1.3tn to meet its energy, transport and housing infrastructure needs by 2030, and is £615bn short.

Monday’s report also called for bodies such as the National Infrastructure Commission, an executive agency that provides advice to the government, to be given a “broader remit and be less at the mercy of short-term political cycles”.

Baroness Nicky Morgan, chair of the Investment Delivery Forum, which includes groups such as Aviva and Phoenix, said the next stage for insurers would be to start pilot investment projects with local and national government.

These, she said, should help develop funding models, “understand the scale of some barriers and test new approaches that could then be scaled up at pace”. Morgan, a former minister, is also chair of the ABI.

On the regulatory side, the forum said it was considering what it called a “sandbox” idea, where the industry and its regulator, the Bank of England’s Prudential Regulation Authority, could “discuss and test the merits of assets” that are not currently eligible to be used in the relevant insurer portfolios but may be in future.

The forum has focused on three sectors: energy generation, energy networks and housing. It has identified some “promising” areas for investment, including nuclear power, offshore floating wind turbines, charging infrastructure for electric vehicles and affordable housing.

It highlighted the Thames Tideway Tunnel as a project that was paid for by a new financial structure that is charging customers during the construction period while allowing payouts to investors.

Expanding the Tideway approach could “open up more investment by insurers, to other sectors of the economy”, it said. However, critics of the project have said it rewarded investors at the expense of taxpayers and customers.