By Chris Vellacott
LONDON Dec 19 British insurance group Aviva
has made its first commitment since joining five peers in
pledging to spend billions more on UK infrastructure projects,
lining up 500 million pounds ($820 million) for immediate
Two weeks ago the UK government unveiled plans for the six
insurers to invest 25 billion pounds over the next five years in
transport and energy projects as part of a national
infrastructure plan designed to help boost the economy.
Aviva said on Thursday that its commitment follows last
month's deal on new European capital requirements for insurers -
known as Solvency II - which had proved less burdensome than
initially feared, freeing up more money to invest.
"As a direct consequence of the recent agreement on Solvency
II, we now have the political and regulatory foundations to
invest in the country's infrastructure," said Chief Executive
"The (UK) government recognises we cannot build on shifting
sands and it is essential that the government, the regulators
and the EU act together."
Other insurers have also hailed the commitments in the UK as
the fruit of a victory over the original proposals for Solvency
II which they said threatened to stifle investment and economic
Many big insurers are eager to invest in infrastructure
because they offer long-term inflation beating regular returns
from road tolls and rents which fit well with the companies long
term liabilities on pension products.
However, they said early proposals under Solvency II would
have hampered their ability to commit money to projects by
forcing them to lock up more capital.
The insurance industry had argued that making insurers
reduce risk by holding more capital in reserve, often in
short-term government debt, was at odds with government policy
to harness private capital for infrastructure projects.
"There is a mis-match between potential investment finance
being skewed into short-term government debt while the same
governments desperately need it to be channelled into projects
to boost short-term growth and develop long-term productive
capacity," the Association of British Insurers (ABI) said in a
report earlier this year.
Tidjane Thiam, Group Chief Executive of British life insurer
Prudential, said in November he had considered
relocating the group's headquarters outside Europe because of
Solvency II proposals.
Aviva said it already has 5 billion pounds invested in UK
infrastructure including loans for developing schools,
universities, hospitals, utilities, airports and railways.
"Aviva is contributing the building blocks of the UK's
future, making an additional 500 million pounds available
immediately to invest in the country's schools, hospitals and
transport," Wilson said.