Phoenix CIO calls for NWF product rethink to unlock insurer capital
The UK’s National Wealth Fund (NWF) will need to reconsider how its investment products are structured if it is to attract large-scale capital from the insurance sector, according to Phoenix Group CIO Michael Eakins
Last week, the NWF published details of its five-year strategy, aiming to mobilise up to £100bn in institutional investment, with support for the energy transition at the heart of the plan.
The £27.8bn fund, established to crowd in private capital to UK projects, said it aims to accelerate the pathway to clean energy and support projects that could help avoid 500 million tonnes of CO₂e emissions by 2050. Sectors expected to receive backing include carbon capture, battery storage, hydrogen, grid infrastructure and critical minerals, as the fund looks to deploy the remaining £19.4bn of its capital by 2030.
Through the use of blended finance and guarantees, the NWF is seeking to attract institutional co-investment and increase its overall firepower.
The strategy has been broadly welcomed by UK investors, including Phoenix Group, one of the UK’s largest insurers with £280bn in assets under management. However, Eakins told Net Zero Investor that further adjustments will be needed for long-term insurance and annuity capital to participate at scale.
“We are particularly encouraged by the plan’s clear focus on priority sectors and green technologies, as well as its recognition of the critical role that collaboration with commercial financiers, including banks and institutional investors, will play in mobilising capital at scale,” he said.
However, he cautioned that investment structures must align with insurers’ regulatory and balance sheet requirements. Under Solvency II, insurers face relatively high capital charges for long-term illiquid assets and must hold additional capital against certain risks.
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While the new Solvency UK regime, which came into force in 2024, has removed caps on sub-investment grade assets and adjusted Matching Adjustment rules to allow greater flexibility for assets with highly predictable cashflows, Eakins said current opportunities linked to the NWF may still need to be adapted.
“Whilst we agree with the direction of travel, we would urge the NWF to consider products, including guarantees and blended finance, to be better structured to be more efficient for UK annuity writers. Doing so would encourage insurers to bring forward investment opportunities that align with our credit risk requirements,” he added.
Eakins also welcomed the NWF’s plans for closer coordination with public bodies such as the Office for Investment, Great British Energy and local authorities, describing this as “critical to help develop a robust pipeline of investable projects, recognising the Fund’s reliance on origination partners.”
He reiterated that the UK insurance and long-term savings industry stands ready to invest up to £100bn in assets that support economic growth and the energy transition, and said Phoenix would continue to work with the NWF to help secure that capital.
