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U.K. insurers are pressing for the mobilization of a pledged GBP 100 billion (USD 126bn) investment, facilitated by post-Brexit regulatory reforms, to be directed into green infrastructure projects through innovative public-private partnerships. The regulatory changes, known as Solvency II reforms, were promoted by ministers as a significant “Brexit dividend,” easing capital rules and introducing other modifications inherited from the EU. 

While these reforms aim to encourage additional investments by U.K. insurers in domestic infrastructure, concerns have been raised within the industry about a scarcity of viable projects that could potentially impede the expansion of financing efforts. The Investment Delivery Forum, established by the Association of British Insurers (ABI), has released an interim report highlighting the need for new public-private partnerships utilizing taxpayer funds to mitigate risks. 

In its report, the Investment Delivery Forum emphasizes that such partnerships would not only reduce risks but also contribute to smoothing out investment returns. This, in turn, would assist projects in achieving an investment-grade credit rating, aligning them more effectively with insurers’ long-term liabilities. 

The report states, “[The current regulatory approach] is rightly in the interests of policyholders — to keep their money safe — but it narrows the funnel of investable projects.” According to figures released by the forum in November, the U.K. faces a shortfall of GBP 615 billion out of the GBP 1.3 trillion required to meet its energy, transport, and housing infrastructure needs by 2030. 

The Investment Delivery Forum’s report also advocates for broader mandates for bodies such as the National Infrastructure Commission, suggesting they be less susceptible to short-term political cycles. Baroness Nicky Morgan, Chair of the Investment Delivery Forum and former minister, highlighted the next steps for insurers, which involve initiating pilot investment projects in collaboration with local and national governments. 

These pilot projects are intended to aid in the development of funding models, understanding barriers on a practical scale, and testing new approaches that can be rapidly scaled up. Baroness Morgan, who also chairs the ABI, underscored the importance of exploring innovative funding structures to facilitate sustainable, long-term investments in critical sectors. 

Addressing regulatory considerations, the forum is exploring a “sandbox” concept where industry participants and the Bank of England’s Prudential Regulation Authority could collaboratively assess the eligibility of certain assets for insurer portfolios, even if they are currently excluded. 

The Investment Delivery Forum’s focus encompasses three key sectors: energy generation, energy networks, and housing. Notable areas for investment include nuclear power, offshore floating wind turbines, electric vehicle charging infrastructure, and affordable housing. The forum pointed to the Thames Tideway Tunnel as a successful case, suggesting that replicating its financial structure could attract more insurer investments across various sectors. 

Critics, however, have raised concerns about projects like the Thames Tideway Tunnel, arguing that they may favor investors at the expense of taxpayers and customers. As the U.K. insurers move forward with their advocacy for green investments, the industry is navigating a delicate balance between regulatory safety and fostering innovation to address the nation’s infrastructure challenges. 

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