City investor gears up to unleash post-Brexit investment ‘big bang’

·2-min read
Phoenix Group - Chris Ratcliffe/Bloomberg
Phoenix Group - Chris Ratcliffe/Bloomberg

One of the City’s biggest investors is gearing up to unleash a post-Brexit investment “big bang” after redeploying dozens of employees to earmark infrastructure projects it can plough cash into.

Phoenix Group, the FTSE 100 life insurer, has created a 50-strong team of analysts and specialists to examine what projects it can invest in once Jeremy Hunt relaxes EU-era rules in the insurance industry, The Telegraph understands.

In November, the Chancellor confirmed that the Government will overhaul the Solvency 2 rulebook, which requires insurers to hold vast sums of cash on their balance sheets and dicates where they can invest.

Despite fears that implementation of the reforms could drag on for years, Phoenix expects the majority of the reforms to be put in place by this time next year and has established the team to make sure it is prepared to boost investment immediately.

Phoenix’s team is understood to be running the rule over a number of infrastructure projects, including wind farms, social housing, care homes and university campuses, as it prepares to unleash billions of pounds worth of capital into the UK economy.

Insurance has been touted for years as an industry that could benefit from relaxing the EU rules introduced to make financial institutions safer after the 2008 financial crash.

Industry leaders have said they could invest an extra £100bn in illiquid assets like wind farms and other infrastructure projects, as part of so-called Big Bang 2.0 reforms, but their hands have been tied as a result of Solvency 2 restrictions.

Mr Hunt only pushed ahead with the reforms at the end of last year after a protracted row between the Treasury and the Bank of England’s Prudential Regulation Authority (PRA), which raised concerns that the reforms could negatively affect policyholders.

The Treasury acknowledged at the time that there was “no consensus” surrounding the so-called matching adjustment mechanism covering long-term investments, but it has brushed aside concerns raised by the PRA.

Industry chiefs argue that the mechanism pushes them away from projects such as wind farms and into low-yielding sovereign and corporate bonds.

The PRA, which supervises Britain’s insurers, previously said it is determined to ensure any easing of the regulatory burden does not create a risk to policyholders or to the stability of companies. It also warned against an overhaul that “materially decapitalises the insurance sector”.

A Phoenix spokesman said: “We are working closely with the PRA, our industry peers and the Treasury to ensure that Solvency 2 changes allow us to invest quickly and safely in the type of projects that will best serve society and support government ambitions to boost productivity, level up the country and support the transition to net zero.”