TIAA offers four policy solutions to expand private-sector infrastructure investments
May 18, 2018 — WASHINGTON–(BUSINESS WIRE)–According to a new white paper from TIAA, a leading financial services provider, public-private partnerships (P3s) have proven to be valuable in building our nation’s infrastructure, yet they remain under-utilized due to public policy challenges that deter life insurance companies from investing in them. The paper suggests several modest regulatory and policy reforms to encourage more P3 project investment by insurers, including the adoption of consistent regulatory guidelines, the preservation of key tax tools, and streamlining the project approval process.
“America’s infrastructure – the backbone of our economy – is in need of new approaches to investment,” said Roger W. Ferguson, Jr., president and CEO, TIAA. “Insurance companies’, such as TIAA’s, long-term investment approach and ample capital are well-suited to contribute to rebuilding our nation’s infrastructure.”
Amid growing national infrastructure needs and limited public funding, the P3 model has emerged as a promising financing approach to provide the capital and long-term commitment necessary to fund essential improvements. The White House’s recent infrastructure proposal recommends leveraging P3s alongside traditional mechanisms such as federal and private funding and municipal bonds.
Seeking Diverse Investments
Life insurance companies look for diverse investments to meet obligations to policyholders, which often do not come due until far in the future. Infrastructure projects are particularly attractive investments due to their lower risk, longer, stable terms and generally predictable, steady returns. As of 2017, life insurance companies had collectively invested over $1 trillion in infrastructure projects.i But the current patchwork of federal and state P3 rules, replete with inconsistent, complex regulations, structures and procedures, often deters greater private-sector investment.
Drawing on its not-for-profit heritage and a century of insurance experience, TIAA recommends four bipartisan policy reforms to enable increased, sustained investment by insurers:
- Define consistent rules and methodologies across geographies: Bring a more consistent structure to the patchwork of regulations governing P3s to create a more structured market and encourage more private investment, including by insurers
- Form an industry working group at the National Association of Insurance Commissioners (NAIC): Gather recommendations regarding the creation of incentives, the removal of regulatory impediments, and the expediting of approvals for insurance companies’ infrastructure investments to produce state-level best practices and a successful framework for P3s
- Preserve key tax tools: Maintain and even broaden tax exemptions on certain governmental bonds to sustain and further incentivize infrastructure investment by insurance companies
- Expedite approval processes: Streamline the permitting and review processes to ensure infrastructure projects advance in a more coordinated, efficient manner, while maintaining appropriate oversight
Infrastructure investment has been an essential component of TIAA’s investment products. Through Nuveen, the company’s investment manager, TIAA has been involved in the financing of essential municipal bond projects for investors for more than a century. Nuveen today manages more than $135 billion in municipal fixed income assets.
Existing levels of public funding alone cannot close the significant shortfall to meet America’s current and future infrastructure needs. TIAA welcomes the opportunity to work with policymakers, regulators, industry partners and other stakeholders to improve industry and governmental review processes, incentivize long-term commitments, secure strong returns and support the public good.
To download a copy of TIAA’s white paper on opportunities for infrastructure investment by life insurers, visit here.