SII reform could free up £20bn of investments for PIC

Written by Adam Cadle

07/01/2022

Pension Insurance Corporation (PIC) has calculated that appropriate reform of Solvency II could increase its planned investment of £30bn in productive finance by 2030, to £50bn.

Productive finance is investment that expands productive capacity, furthers sustainable growth and can make an important contribution to the real economy. PIC argued that current flaws in Solvency II regulation mean that it and other life insurance companies are encouraged to invest in large, well-funded companies to such an extent that the country is being deprived of the benefits of increased long-term investment in the economy. Since 2016, PIC has invested £10.9bn in productive finance. However, over the same period £10bn of productive finance investment was foregone by PIC due to overly restrictive Solvency II requirements.

PIC has determined that, with appropriate and UK-specific reform of Solvency II, the company would have an additional £2bn per annum to invest in productive finance in the short-term, which includes £500m to invest in renewables or green assets. This would equate to 34 offshore wind turnbines, generating 254 MW of electricity, or 14 new solar parks.

PIC also stated that reform would open up an additional £450m of investment into social housing. This equates to the funding of 15,000 additional affordable homes every year (more than 10% of the total of new social homes needed across the UK annually) with the potential for 45,000 new social homes in the first year after reform, or the energy efficiency retrofit of 53,500 social homes (meaning social housing residents would face lower fuel bills and less associated health problems from cold homes), or maintenance costs for 285,000 existing social homes.

Tracy Blackwell, CEO of PIC, 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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