Allianz, Aviva pledge more capital to infra debt

The move, which follows the announcement of accommodating tax changes, is part of a wider commitment by UK asset managers to invest about £9bn in private placements.

Two of the UK’s largest insurers have reacted to tax changes announced this week by setting ambitious targets for their investments in infrastructure debt.

UK-based insurer Aviva today said that it has made an immediate allocation of £500 million (€637 million; $784 million) to UK infrastructure projects, on top of the £500 million it already allocated to the asset class in December 2013 and which has now been fully deployed across a number of projects.

German-headquartered insurer Allianz meanwhile said that it intended to invest “upwards of £3 billion” in UK infrastructure over the next three to five years through Allianz Global Investors, its asset management arm. The firm, which has more than €2 billion invested in infrastructure debt Europe-wide, added that it was “on track” to deploy around £600 million in UK infrastructure debt by the end of 2014.

The declarations come after the UK government, as part of the Chancellor’s Autumn Statement, pledged to introduce a new withholding tax exemption for private placements.

“Compared to the stability and depth of its US counterpart, the European private placement market remains in its infancy, so will need continued careful nurturing to achieve its full potential,” said Deborah Zurkow, chief investment officer for infrastructure debt at Allianz Global Investors.

“Simple, effective changes like this, that help reduce the complexity involved in transactions, are the most cost-effective way of creating an attractive, long-term infrastructure investment environment for the broadest possible base of investors.”

Aviva said the funds to support its new allocation, available immediately, are in addition to its existing level of infrastructure investments. They also form part of a wider commitment by six UK insurers to invest about £9 billion in UK private placements in the next five years, which will include lending to infrastructure projects.

The firm’s latest investments in the asset class comprise a 25 years, £67 million loan to construct and maintain 390 social housing units in Stoke on Trent, England, as well as a commitment, alongside the European Investment Bank and International Public Partnerships, to provide up to £600 million of senior funding to up to 46 schools across the UK.