London-based Aviva today announced an allocation of £500 million (€598 million; $819 million) to invest in UK infrastructure.
The funds, available immediately, come in addition to Aviva’s existing exposure to the sector. The insurer expects to deploy them in the form of debt financing for projects in transport, utilities, hospitals, schools and other sectors.
“This commitment is a direct result of the recent agreement on Solvency II, the European wide insurance regulation, which provides greater regulatory and political certainty for insurers to invest in infrastructure assets,” Aviva said in a statement.
The firm’s allocation is the first tranche of the wider insurance industry’s commitment to invest £25 billion to UK infrastructure in the next five years. The pledge formed the core of the government’s revamped National Infrastructure Plan unveiled earlier this month, which detailed £375 billion of planned public and private investments in energy, transport, communication and water projects in the years to 2030 and beyond.
The other institutions involved alongside Aviva comprised Legal & General, Prudential, Standard Life, Friends Life, and Scottish Widows. Their joint announcement came a day before the Chancellor’s Autumn Statement and a week after the UK successfully rebuffed the introduction of new requirements to the Solvency II directive, which would have limited the ability of insurers to invest in infrastructure and other alternative assets.
Aviva currently has £5 billion invested in UK infrastructure projects, including PFI loans for social infrastructure and corporate bonds of utility, airport and rail companies. Its latest transactions include a £43 million investment in Birmingham’s new dental school and hospital, a £28 million loan to a New York accommodation project and £32.2 million of funding to build 11 new fire stations for the Staffordshire Fire and Rescue Service.
In July 2013 Aviva Investors also bought a 12.3 megawatts (MW) portfolio of solar panels systems built on 4,000 UK homes.