Infrastructure investment ramifications from Solvency II, says Fitch

The path an insurer takes under Solvency II will be key to its ability to effectively invest in infrastructure projects, according to rating agency Fitch.

Insurers operating an internal model will still be able to reap the benefits of investment in infrastructure projects, whereas those using a standard formula could be penalised, according to Fitch.

In a statement Fitch said: “Infrastructure investments can be suited to insurers because their cash flow features and long duration are a good match for the long-term liabilities that insurers have. However, these investments are treated penally under current proposals for the standard formula and the high capital charges mean that the risk-adjusted returns would be relatively low.”