Changes to the prudential regulatory regime, now known as Solvency UK, aimed to make it easier for annuity providers to invest in productive assets – which are typically large-scale and long-term debt investments, expected to generate greater returns over time. During discussions at the time of the reforms, annuity providers pledged to invest £100 billion in productive finance over the next decade. This was helped by a reduction in the Risk-Margin and investors now being able to include assets with ‘highly predictable’ cash flows within their Matching Adjustment portfolios.
As the reforms came into effect over 2024, the ABI has tracked the industry’s progress towards reaching its commitment through its Investment Delivery Forum. Its first update report shows that, across 2024, £10.9 billion has been invested against annuity business directly into UK focused productive assets. This includes:
£3.8 billion invested in real estate, helping to build affordable and social housing and student accommodation.
£2.7 billion invested in utilities including energy and water supply.
£1 billion invested in transport, supporting buses and ports.
The remaining £3.4 billion was invested across a variety of sectors including manufacturing, construction, and human health and social work.
As key investors in UK infrastructure, the insurance and long-term savings industry plays a crucial role in supporting UK economic growth and the net zero transition. It is committed to addressing any barriers to investment so that it can maximise the impact of its pledge.
Progress to tackle these barriers is being made through the ABI’s Investment Viability Group, which brings together HM Treasury, the National Wealth Fund, the Prudential Regulation Authority (PRA) and industry to help accelerate investment. The PRA’s Matching Adjustment Investment Accelerator (MAIA) is also a positive step to help insurers be more agile as investors.
Through its work with government, regulators and national regional bodies to help identify a stronger and wider pipeline of investable opportunities, the industry is keen to go further and faster. The introduction of the online Infrastructure Pipeline Tool will be a vital asset to facilitate further investment. And by expanding the definition of ‘highly predictable’ assets eligible for the Matching Adjustment and reviewing its limits, the PRA could offer a further boost to the industry’s ability to invest in UK productive assets.
Hannah Gurga, ABI Director General, said: “Annuity investors have the potential to be true nation-builders – channelling long-term capital into infrastructure and green projects that grow the economy and accelerate the UK’s net-zero transition. With £10.9 billion invested last year, the momentum is real – and with the right pipeline of opportunities we’re ready to go further and faster.”
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