The Bank of England (BOE) plans to scrutinise risk exposure in insurer infrastructure investment, with one official warning it could present 'idiosyncratic risks'.
The BOE’s Prudential Regulation Authority (PRA) has said it will scrutinise insurer investment in such assets, which may not be suitable for traditional portfolio management alone.
Its director of life insurance, Andrew Bulley, said that while projects were ‘attractive’ for investors they presented ‘idiosyncratic risks’.
However he added the PRA was ‘neutral’ about whether insurers should increase their exposure to infrastructure investments.
‘Our concern is to ensure that the insurer is adequately capitalised relative to the risks it is running, and – importantly – is able to understand and control those risks,’ Mr Bulley said.
‘This includes having reliable information and data as well, of course, as expertise in the investment sector concerned.
New European Union insurer rules coming into force early next year are expected to support the sector form an informed opinion on infrastructure investment.
‘We shall continue to review the evidence as the new regime beds down,’ Mr Bulley added.
