The long investment horizon and stable returns which can be offered by the infrastructure asset class make it an attractive investment for many insurance companies in order to match their long-term liabilities. Preqin tracks 188 insurance companies that are currently active in the asset class. The most prominent region for investor activity is Europe, which is home to 38% of active insurance firms. This is closely followed by the US, with 32% of active insurance firms located there, followed by Asia (19%). Eleven percent are based in countries outside of these regions.
The majority of insurance companies invest in infrastructure by making commitments to third-party unlisted infrastructure funds. Eighty-five percent of insurance companies actively investing in infrastructure look to make commitments to unlisted vehicles, while 24% make direct investments and just 7% target listed infrastructure funds. In terms of strategies when investing in infrastructure, primary equity investments remain by far the most commonly utilized form of investments by insurance companies. Ninety-three percent of insurance companies investing in infrastructure will invest using this strategy.
We are, however, seeing a growing number of insurance companies turning towards infrastructure debt opportunities. Twenty-eight percent of insurance companies are now open to this strategy, a sign that many are rushing to fill the funding gap created by banks pushed out of the infrastructure debt sector due to incoming capital adequacy requirements under BASEL III. CNP Assurances has recently announced plans to build a €2bn infrastructure debt portfolio over the next three years through a co-investment partnership with baking group Natixis. This follows a similar partnership formed in February between Natixis and Ageas. In addition, Europe-based insurer Axa this week announced plans to lend €10bn to infrastructure projects over the next five years.
Other notable insurance companies that are active in the infrastructure asset class include South Korea-based Hanwha Life Insurance, who has a current infrastructure allocation of $3.9bn; India-based Life Insurance Corporation of India, and Manulife Financial, located in Canada.