Across 2024, £10.9bn has been invested from annuity business directly into UK-focused productive assets, the Association of British Insurers (ABI) has reported.

This investment follows the pledge by the insurance and long-term savings industry to invest £100bn into UK productive assets over the next 10 years, which ABI said in its first progress update report that the industry is making “positive progress”.

The investment across 2024 includes £3.8bn invested in real estate, helping to build affordable and social housing and student accommodation, £2.7bn in utilities, including energy and water supply and £1bn invested in transport, supporting buses and ports.

The remaining £3.4bn was invested across several sectors, including manufacturing, construction, and human health and social work.

The pledge followed changes to the prudential regulatory regime, now known as Solvency UK, which aimed to make it easier for annuity providers to invest in productive assets, 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 £100bn in productive finance over the next decade, which was made possible by two reforms.

These were a reduction in the risk margin and investors having the ability to include assets with ‘highly predictable’ cash flows within their matching adjustment portfolios.

The association said that, 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 and is committed to addressing investment barriers so that it can maximise the impact of the pledge.

The ABI explained that progress to tackle these barriers is currently being made through its Investment Viability Group, which includes HM Treasury, the National Wealth Fund, the Prudential Regulation Authority (PRA) and the industry, to accelerate investment.

It also pointed out that the PRA’s Matching Adjustment Investment Accelerator is a “positive step” to help insurers be more agile as investors.

The industry is working with the government, regulators and national regional bodies to identify a broader range of viable investment opportunities.

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 is expected to support this effort by providing better visibility of upcoming projects.

Additionally, if the PRA expand the definition of ‘highly predictable’ assets and reviews the limits for the matching adjustment, it could further support the industry’s capacity to invest in UK productive assets.

ABI director general, Hannah Gurga, 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 £10.9bn invested last year, the momentum is real – and with the right pipeline of opportunities we’re ready to go further and faster.”

This article was first published on our sister title, Pensions Age.

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