German insurance giant Allianz is eager to invest more of its 570 billion euro ($720 billion) portfolio in domestic infrastructure projects but says the government in Berlin must first improve the regulatory environment for such investments. Speaking to Reuters at Allianz headquarters in Munich, board member Maximilian Zimmerer said the German economy was suffering from a lack of private investment, echoing the view of leading economists who have been urging Chancellor Angela Merkel's coalition to take steps to address the shortfall.
Although government ministries have begun exploring ways to plug an annual "investment gap" estimated at 80 billion euros, Merkel and her cabinet are reluctant to free up additional public money because that might make it more difficult for them to deliver on a promise to balance the federal budget next year.
Zimmerer, who is responsible for the investments of Allianz's substantial portfolio, said Germany could tap the vast funding power of the insurance sector to improve its energy and transport networks if only the conditions were right.
"The time has never been cheaper for states to modernise infrastructure," said Zimmerer. "This must be tackled urgently."
Rock-bottom interest rates have slashed the yield that Allianz can earn on traditionally safe fixed-income investments like government bonds, which make up the lion's share of its portfolio.
As a result, Allianz and its competitors - which must meet obligations to pay out policy holders decades into the future - are eager for opportunities to improve their investment yield.
Investments in motorways, gas pipelines or wind and solar parks are seen as the perfect match, but Zimmerer said there were too few attractive projects available.
"We look at about ten infrastructure projects per year and only invest in one," he said. "It's not enough. We'd like to do more."
Zimmerer urged Berlin to shorten approval times for big projects and ensure that the views of local citizens are taken into account earlier in the process.
A number of prominent infrastructure projects, notably plans for a new train station in the southern city of Stuttgart, have been dogged by delays in recent years due to public opposition.
Zimmerer said lawmakers could also make it easier to group smaller, local projects together so they were more suited to large investors like Allianz, and must also ensure that regulations were not changed retroactively.
Allianz and its partners in the Gassled natural gas pipeline are suing Norway over its decision to cut gas transport tariffs, saying the move could cost them billions of dollars in lost earnings.
"The Gassled case caught us off guard," Zimmerer said.
At the European Union level, Zimmerer said insurance regulators should allow infrastructure to be considered an asset class of its own and treated similarly to real estate when it comes to the capital buffers insurers must hold to cover investment risk.
Under rules for the insurance sector that are due to take effect in 2016, infrastructure could face capital charges of up to 70 percent, while real estate investments were around 25 percent, Zimmerer said.
"Up to now, no project has been rejected on grounds of regulatory risk charges but we could face bottlenecks if this business really starts to take off," he said.
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