ThinkAdvisor: Biden’s $2T Infrastructure Plan Could Boost Life Insurers’ Yields

April 01, 2021

Eric Richards, the co-chair of O’Melveny’s Corporate Department and a partner in the firm’s Project Finance and Development practice, spoke to ThinkAdvisor about investment opportunities for insurers stemming from President Joe Biden’s US$2 trillion American Jobs Plan infrastructure proposal.

The President’s proposal calls for investing 1% of gross domestic product per year to update highways, bridges, ports, airports, and transit systems, prepare for natural disasters, upgrade the electric grid, and improve energy efficiency.

As life insurers seek ways to increase yields on the investment portfolios they use to support life and annuity obligations, infrastructure projects can offer long-lasting, steady, secure payment streams, Richards told the publication. He also believes that money managers at life insurance companies share individual investors’ interest in supporting “environmental, social and governance” (ESG) projects, creating further incentive.

The challenge, however, is that the administration has yet to release details about opportunities for private-sector investors to help with financing, or about any incentives or guarantees that might be available to investors. “This story is going to play out over the next several months,” Richards said. He noted that life insurers may be able to reduce some of the complexity involved with investing in infrastructure projects by investing in a fund created by a private equity firm or other company with experience managing infrastructure project investments, rather than by investing directly in the projects.

Read the full ThinkAdvisor article here.