Insurers ramp up private infrastructure debt investments

Digital infrastructure and energy projects are attracting more long-term institutional capital.

Insurers are increasing their investment in private infrastructure debt as demand grows for long-term assets that match their liabilities.

The report said insurers are becoming more active alongside pension funds, sovereign wealth funds and family offices as infrastructure finance evolves to support the global expansion of digital infrastructure and the energy transition, according to a new report by Fitch Ratings.

Fitch said infrastructure finance is increasingly bringing together corporate debt, project finance and structured finance, with investors and borrowers seeking more flexible funding options across both private and public capital markets.

Monsur Hussain, Head of Markets Research at Fitch, said insurers' growing appetite for private infrastructure debt is being driven by the need to match long-term liabilities while improving capital efficiency under solvency and risk-based capital regimes. 

He added that pension funds and sovereign wealth funds continue to provide long-term strategic capital for infrastructure projects.

The report said infrastructure is becoming a bigger part of global credit markets, with capital moving across traditional market boundaries. Investors are looking for financing structures that better suit long-term cash flows, regulatory requirements and different levels of risk.

Borrowers are also changing how they raise funding. Fitch said corporate issuers are increasingly using joint-venture back leverage, credit tranching and hybrid debt alongside traditional corporate bonds to finance infrastructure projects, particularly in capital-intensive sectors such as data centres and power.

The report, The Future of Infrastructure Finance: Asset Focus, New Capital and Investor Appetite, is the second in Fitch's series examining how infrastructure finance is changing. 

It said the market is becoming more complex as it attracts a wider range of investors and financing structures, prompting changes in how infrastructure credit is analysed.