Pension Insurance Corporation has called for an urgent, extensive reform of insurance regulation to unlock “tens of billions” of investment in housing and infrastructure.
PIC said the EU regulatory framework Solvency II is restricting private sector funding for levelling up and green agendas, which could be unleashed in a post-Brexit reform.
The pensions insurer invests in long-term social housing and build-to-rent assets, for example funding 520 flats at New Victoria in Manchester (pictured) for Muse Developments, Network Rail and Manchester City Council.
PIC currently has just over £200m in BTR schemes, as part of some £10.9bn in productive finance, and anticipates that it will provide £30bn by 2030.
Changes to Solvency II would see this climb to £50bn, allowing PIC to invest an additional £2bn a year, of which £450m a year would be dedicated to social housing to create some 15,000 homes annually, and further funding to support renewable energy, net zero ambitions and infrastructure for levelling up.
Flaws in the current regulation mean that PIC and other life insurers are encouraged to direct investment at already large, well-funded companies, preventing other long-term investments.
Reform of Solvency II is being considered by the Treasury and the Prudential Regulation Authority. However, PIC said there is a danger of delays and failure to achieve full reform.
PIC chief executive Tracy Blackwell said: “We have a once-in-a-lifetime opportunity to channel new investment into communities across the UK, building quality homes, decarbonising our economy, creating jobs and levelling up.
“The life chances and financial security of millions of people across the country depend on the timely and successful reform of this key piece of financial services regulation. Success would incentivise tens of billions of pounds of long-term investment and enhance consumer protections.”
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