From pledge to progress: £10.9 billion invested in UK productive assets - ABI

The insurance and long-term savings industry is making positive progress towards its pledge to invest £100 billion into assets which contribute to economic growth and the net zero transition over the next decade, with £10.9 billion invested across a variety of sectors including real estate, utilities and transport in 2024.¹

Changes to the prudential regulatory regime, now known as Solvency UK, aimed to make it easier for annuity providers to invest in productive assets² – which are typically large-scale and long-term debt investments, expected to generate greater returns over time. During discussions at the time of the reforms, annuity providers pledged to invest £100 billion in productive finance over the next decade. This was helped by a reduction in the Risk-Margin³ and investors now being able to include assets with ‘highly predictable' cash flows within their Matching Adjustment portfolios.⁴

As the reforms came into effect over 2024⁵, the ABI has tracked the industry's progress towards reaching its commitment through its Investment Delivery Forum.⁶  Its first update report shows that, across 2024, £10.9 billion has been invested against annuity business directly into UK focused productive assets.⁷ This includes:

• £3.8 billion invested in real estate, helping to build affordable and social housing and student accommodation.
• £2.7 billion invested in utilities including energy and water supply.
• £1 billion invested in transport, supporting buses and ports.
• The remaining £3.4 billion was invested across a variety of sectors including manufacturing, construction, and human health and social work.

As key investors in UK infrastructure, the insurance and long-term savings industry plays a crucial role in supporting UK economic growth and the net zero transition. It is committed to addressing any barriers to investment so that it can maximise the impact of its pledge.

Progress to tackle these barriers is being made through the ABI's Investment Viability Group, which brings together HM Treasury, the National Wealth Fund, the Prudential Regulation Authority (PRA) and industry to help accelerate investment. The PRA's Matching Adjustment Investment Accelerator (MAIA) is also a positive step to help insurers be more agile as investors.

Through its work with government, regulators and national regional bodies to help identify a stronger and wider pipeline of investable opportunities, the industry is keen to go further and faster. The introduction of the online Infrastructure Pipeline Tool will be a vital asset to facilitate further investment. And by expanding the definition of ‘highly predictable' assets eligible for the Matching Adjustment and reviewing its limits, the PRA could offer a further boost to the industry's ability to invest in UK productive assets.

Hannah Gurga, ABI Director General, said: “Annuity investors have the potential to be true nation-builders – channelling long-term capital into infrastructure and green projects that grow the economy and accelerate the UK's net-zero transition. With £10.9 billion invested last year, the momentum is real – and with the right pipeline of opportunities we're ready to go further and faster.”

Notes to editors

1. Investment patterns can vary significantly throughout a typical calendar year, determined by market conditions and the volume of opportunities being presented. Therefore, this data should not be taken as indicative of annual trends and the annual total in future years may be significantly above or below the 2024 figure.
2. A productive investment asset is defined as one that:
   1. Contributes to the real economy: It actively supports economic growth and
   2. Expands productive capacity: It enhances the ability to produce goods or services or,
   3. Furthers sustainable growth: It aligns with sustainable development goals.
3. Risk Margin - an additional buffer within a firm's Technical Provisions, intended to ensure that funds are available to transfer the liabilities of a failing insurer to a third party with no detriment to policyholders.
4. Matching Adjustment (MA) - an addition to the risk-free discount rate used by insurers to value their liabilities.  It recognises that long-term, ‘buy and hold' insurers are not exposed to day-to-day fluctuations in the market value of the assets used to back those liabilities.  It is calculated by subtracting the Fundamental Spread (an allowance for risks retained by the insurer) from the asset spread over risk-free.
5. The most impactful changes to insurers' investments within Solvency UK reforms (changes to the Matching Adjustment, allowing MA eligibility for assets with highly predictable cash flows and removing the sub-investment grade cap) came into force on 30 June 2024. Other reforms included: changes to the risk margin, implemented on 31 December 2023; changes to reporting requirements and the capital modelling framework, implemented on 31 December 2024.
6. The members of the Investment Delivery Forum are Aviva, Just Group, M&G, Phoenix, Rothesay, Royal London and Scottish Widows. Firms involved in the data tracking include Aviva, Just Group, M&G, Phoenix, Rothesay, Royal London, Scottish Widow, L&G and PIC.
7. Only investments that back annuity business are considered in-scope for tracking. This includes assets sitting outside of the Matching Adjustment Portfolio, providing that they are also supporting annuity business. Investments that are fully or near-fully based in the UK are eligible for tracking. Only primary market transactions (i.e. assets acquired directly, or near directly from the issuer) and assets with a total term of one year or greater are considered in scope. This therefore excludes short term assets such as treasury bills and commercial paper.

About the ABI

The ABI is the definitive voice of the UK's world-leading insurance and long-term savings industry, which is the largest sector in Europe and the third largest in the world.

We represent more than 300 firms within our membership including most household names and specialist providers, providing peace of mind to customers across the UK.

Our sector is productive, inclusive and essential to the UK economy and together, we are driving change to protect and build a thriving society.

Find out more at abi.org.uk