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Infrastructure and insurance are key elements of global economic and human development. Investing in infrastructure creates jobs, generates demand and enhances efficiency. Insurers' role as investors is as important as their protection role.
Infrastructure and insurance are key elements of global economic and human development. Investing in infrastructure creates jobs, generates demand and enhances efficiency. Insurers' role as investors is as important as their protection role.
Infrastructure and insurance are key elements of global economic and human development. Investing in infrastructure creates jobs, generates demand and enhances efficiency. Insurers' role as investors is as important as their protection role.
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Primary Credit Analyst: Marco Sindaco, London (44) 20-7176-7095; marco.sindaco@standardandpoors.com Secondary Contacts: Lotfi Elbarhdadi, Paris (33) 1-4420-6730; lotfi.elbarhdadi@standardandpoors.com Mark Button, London (44) 20-7176-7045; mark.button@standardandpoors.com Michael Wilkins, London (44) 20-7176-3528; mike.wilkins@standardandpoors.com Table Of Contents Investments That Make A Good Match Industrywide Commitment Shows The Way Forward Fulfilling The Need For Attractive Yields In A Low Interest Rate Environment Infrastructure Assets Have A Strong Default And Recovery Record, Although Based On Limited Data A Source Of Diversification, Although A Complex And Still-Underdeveloped Asset Class Solvency II Clamps Down On Capital Charges How Infrastructure Investments Affect Our Financial Strength Ratings Infrastructure Investments And Our View Of Risk Position Infrastructure Investments And The Impact On Capital Adequacy A Tempting, But Not Necessarily Straightforward Purchase WWW.STANDARDANDPOORS.COM/RATINGSDIRECT JULY 7, 2014 1 1342586 | 301112013 Table Of Contents (cont.) Related Criteria And Research WWW.STANDARDANDPOORS.COM/RATINGSDIRECT JULY 7, 2014 2 1342586 | 301112013 Investing In Infrastructure: Are Insurers Ready To Fill The Funding Gap? Infrastructure and insurance are key elements of global economic and human development. Investing in infrastructure creates jobs, generates demand, and enhances efficiency, which lowers costs for businesses and governments, generating a multiplier effect on GDP growth (see "U.S. Infrastructure Investment: A Chance to Reap More Than We Sow," published May 5, 2014). Economic and human development is also correlated with the protection provided by insurers for individuals, their livelihoods, dependents, and assets. At the same time, insurers' role as investors is as important as their protection role, given their key activity of investing the premiums received, particularly for their savings and investment products, which benefits the economy even more directly (see "Underwriting The Recovery: Insurers' Role As Investors Expected To Be Preserved," published Jan. 14, 2014). Recent developments indicate the two sectors may be strengthening their ties, helping each other to fully accomplish their roles. On one side, Standard & Poor's Ratings Services estimates infrastructure financing needs worldwide could total $3.4 trillion annually through to 2030. While we expect governments and banks will remain the dominant investors in infrastructure programs, we also estimate $500 billion in additional funding will be needed each year to make up the shortfall (see "Global Infrastructure: How to Fill A $500 Billion Hole," Jan. 16, 2014). On the other side, life insurers are struggling to find suitable investments to match their long-term and stable liabilities in the current low interest rate environment (see "Why Some European Life Markets Are More Sensitive To Interest Rate Movements Than Others," May 14, 2014). The opportunities for insurers to play a greater role in filling the funding gap are apparent. However, as insurers' interest in, and exposure to, infrastructure investments rise, so could the risks and consequent impact on credit quality. To help issuers and investors understand these risks, we have examined how infrastructure investments can affect insurers' operating performance, portfolio quality and diversification, and capital adequacy--and hence their financial strength ratings. Overview We believe insurers are well-placed to help plug the $500 billion per year gap in infrastructure funding between now and 2030. Infrastructure investments can be a good match for life insurers' liabilities, owing to their long-term maturity and attractive yields. That said, regulation, together with project complexity, illiquidity, and a lack of suitable projects, may thwart insurers' progress in making such investments. When assessing the effect of infrastructure investments on an insurer's financial strength, we look at capital and earnings, risk position, and liquidity, among other factors. WWW.STANDARDANDPOORS.COM/RATINGSDIRECT JULY 7, 2014 3 1342586 | 301112013 Investments That Make A Good Match Long tenors, attractive yields, high recovery rates, and low correlation with other asset classes make infrastructure investments a good match for life insurers' predictable, long-term liabilities. That said, an expansion in infrastructure assets will increase insurers' credit, valuation, and liquidity risks. Infrastructure is a complex asset class, embodying risks that in our view insurers might not be willing to accept, including construction, regulation, and political intervention risks. We note that insurers have in the past had difficulties finding suitable and sizable infrastructure investments, an issue that will likely persist as they increasingly look to alternative investments to diversify from low-yielding government bonds and/or property. Insurers' appetite for infrastructure investments will also be influenced by the regulatory capital requirements they will be subject to under Solvency II regulation. Consequently, we believe many insurers will need to develop in-house skills to manage infrastructure risks, which could slow their diversification into this asset class. We estimate insurance companies worldwide are targeting an allocation of about 3% of their assets under management (AuM) to infrastructure investments over the next 20 years, from 2% at present (see chart 1). Assuming assets managed by insurers continue to represent more than 40% of institutional investors' total AuM (see chart 2), the worldwide allocation by insurers could be about $80 billion per year (for more details, see "Global Infrastructure: How To Fill A $500 Billion Hole," published Jan. 16, 2014). WWW.STANDARDANDPOORS.COM/RATINGSDIRECT JULY 7, 2014 4 1342586 | 301112013 Investing In Infrastructure: Are Insurers Ready To Fill The Funding Gap? Chart 1 WWW.STANDARDANDPOORS.COM/RATINGSDIRECT JULY 7, 2014 5 1342586 | 301112013 Investing In Infrastructure: Are Insurers Ready To Fill The Funding Gap? Chart 2 Industrywide Commitment Shows The Way Forward Insurers' interest in infrastructure investments is evident in the December 2013 announcement by six U.K. insurers of a collective commitment of 25 billion over five years. AXA Group has announced a 10 billion commitment over a similar period, while Allianz SE and Munich Re Group have also announced material commitments in the asset class. (See "Out Of The Shadows: The Rise Of Alternative Financing In Infrastructure," published Jan. 31, 2013.) In addition, Belgian insurer AG Insurance says it will allocate 3 billion, or 5% of its AuM, to infrastructure projects, while CNP Assurances has already committed in 2013 to increase its loan infrastructure debt portfolio up to 2 billion over three years. Furthermore, Assured Guaranty (Europe) Ltd., a bond insurer, has wrapped 77 million of U.K. infrastructure bonds so far in 2014 after wrapping 238 million of similar bonds in 2013. Outside of Europe, Australia-based global multiline insurer QBE Insurance Group has also announced that it is diversifying its investment portfolio to include infrastructure debt. Life insurers are long-term investors able to hold assets for long periods, and typically face less short-term liquidity strains than banks. Annuities, pensions, and long-term saving products are very long-term liabilities for insurers. And long-dated government, mostly domestic, bonds have historically been insurers' favored investments to match their WWW.STANDARDANDPOORS.COM/RATINGSDIRECT JULY 7, 2014 6 1342586 | 301112013 Investing In Infrastructure: Are Insurers Ready To Fill The Funding Gap? relatively illiquid, and predictable, life insurance liabilities, supported also by regulation. However, with government bond yields at low levels in developed markets, the search for yield to mitigate declining investment spreads and deliver competitive policyholders' returns has caused insurers worldwide to seek alternative investments. Fulfilling The Need For Attractive Yields In A Low Interest Rate Environment Investments in infrastructure generally offer higher yields than those available on highly rated government and corporate bonds. This is largely due to their illiquidity premium and the risks associated with infrastructure projects. Over recent months, rated long-dated project finance bonds have typically attracted yields of between 4% and 5% (see chart 3), which is a considerable improvement on the 3% or lower yields available on sovereign debt with equivalent ratings, implying credit spreads between 100 basis points (bps) and 200 bps depending on the rating and tenor (see chart 4). Nevertheless, the attraction of infrastructure investments could decline if interest rates were to increase, enabling traditional asset classes to recover their attractive yields. Chart 3 WWW.STANDARDANDPOORS.COM/RATINGSDIRECT JULY 7, 2014 7 1342586 | 301112013 Investing In Infrastructure: Are Insurers Ready To Fill The Funding Gap? Chart 4 Infrastructure Assets Have A Strong Default And Recovery Record, Although Based On Limited Data Out of more than 510 rated project finance debt issues globally from 462 issuers since Standard & Poor's issued its first project finance rating in 1991, we've seen 34 defaults. (see "Project Finance Default And Recovery: Shale Gas Fuels Rise In U.S. Defaults," published Aug. 9, 2013). And since the first rated project default in 1998, the annual default rate for rated project finance debt has averaged 1.5% (see table 1). This is slightly below the default rate for corporate issuers of 1.8% over the same period. We also note that while corporate default rates spiked upward to more than 4% at the height of the global financial crisis of 2007-2009, rated project finance transactions remained relatively resilient (see chart 5). Table 1 Cumulative Rated Project Finance Default Rates 1992-2012* --Time horizon (years)-- Rating Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10 Year 11 Year 12 Year 13 Year 14 Year 15 AAA 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 WWW.STANDARDANDPOORS.COM/RATINGSDIRECT JULY 7, 2014 8 1342586 | 301112013 Investing In Infrastructure: Are Insurers Ready To Fill The Funding Gap? Table 1 Cumulative Rated Project Finance Default Rates 1992-2012* (cont.) AA 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 A 0 0 0.4 0.8 1.2 1.7 2.3 2.9 2.9 2.9 2.9 2.9 2.9 2.9 2.9 BBB 0.3 0.6 0.8 1.2 1.6 1.7 2 2.3 2.7 3.4 4.3 5.4 6.8 6.8 6.8 BB 0.9 2.4 5.8 8.6 10.6 11.6 12.4 13.3 14.2 14.2 14.2 14.2 14.2 14.2 14.2 B 3.6 9.3 12.5 16 18.7 19.6 20.7 22.3 24.9 29.3 29.3 29.3 29.3 29.3 29.3 CCC/C 17.6 22.6 25.4 27.1 29 29 29 29 29 29 29 29 29 29 N/A Investment grade 0.2 0.5 0.8 1.1 1.5 1.7 2 2.4 2.7 3.3 3.9 4.8 5.9 5.9 5.9 Speculative grade 3.3 6.3 9.6 12.5 14.7 15.5 16.3 17.2 18.3 18.7 18.7 18.7 18.7 18.7 18.7 All rated 1.2 2.4 3.6 4.8 5.7 6.1 6.6 7.1 7.6 8.1 8.6 9.2 10 10 10 Source: S&P 2013. *Calculated By multiplying non-default marginal rates and then subtracting from 1 to get cumulative default rate. N/A--Not applicable. Chart 5 The total number of rated project finance issues is statistically small, however, implying that small numbers of outliers can materially affect our results. Data compiled by the S&P Capital IQ Project Finance Bank Consortium broadly confirms the trends in rated project finance default statistics: In 2012, the database comprised 34 lending institutions WWW.STANDARDANDPOORS.COM/RATINGSDIRECT JULY 7, 2014 9 1342586 | 301112013 Investing In Infrastructure: Are Insurers Ready To Fill The Funding Gap? representing 75% of global project finance syndicated loans (6,862 loans in total). Compared with corporates, project finance debt has also delivered a stronger rate of recovery post default. The average level of recovery across our rated project finance universe is about 75%. However, we would caution that our sample is not large enough to be statistically relevant. Furthermore, these rates form a barbell distribution, with some lenders receiving recoveries close to 100% and others minimal amounts. Also, the recovery patterns of defaulted projects are in part confirmed from data collected by S&P Capital IQ Project Finance Bank Consortium. Data for unrated loans show that defaulted loans have achieved almost full recovery (that is, between 91% and 100%). Either way, this post-default performance is considerably stronger than for corporate bonds, for which recoveries average about 45%. We believe this reflects the specific characteristics of project debt, which typically benefits from a strong collateral package with first-ranking priority security given to lenders. On the downside, it takes longer to resolve infrastructure bond defaults than their corporate counterparts, which could offset some of the benefit of the higher relative recoveries of infrastructure bonds. A Source Of Diversification, Although A Complex And Still-Underdeveloped Asset Class Insurers might use project finance as a means to diversify their asset portfolios because of the low sector correlation to other asset classes. In particular, investments via unlisted investment funds, albeit illiquid, have little correlation with the broad range of assets in which insurers would traditionally invest, including their stock portfolios. However, insurers might not be willing to invest in an infrastructure project, because the asset would not fit their risk tolerance considerations. For example, most insurers remain reluctant to invest in greenfield projects (that is, those projects that incorporate construction risk), which comprise about 70% of the infrastructure project pipeline worldwide, because such projects lack a track record of stable cash flows. Furthermore, project finance loans are rarely traded in the secondary market and lack critical size to be included in public indices. This could prevent insurers from benchmarking and valuing their exposures, which could in turn temper their appetite to increase their project loan portfolios. Diversifying into infrastructure investments requires specialist knowledge, of which insurers have relatively little experience, in our opinion. The risks involved in infrastructure projects include construction and technical and design failures, which are unfamiliar to the majority of insurers. Meanwhile, potential investors cite a lack of industry data as a deterrent to funding infrastructure projects. We therefore believe larger insurers with specialist teams of investment professionals may be more inclined to invest in infrastructure directly through private equity and loan structures, compared with smaller insurers that are more likely to participate through bonds and shares in investment funds. Regulatory and political risks add uncertainty, however, because unpredictable and frequent changes in policies, tax regimes, and tariff-setting can significantly affect infrastructure investments. The Norwegian government's recent gas pipeline tariff reductions, for instance, have raised criticism in the market regarding the potential harm to insurers' investments in infrastructure. WWW.STANDARDANDPOORS.COM/RATINGSDIRECT JULY 7, 2014 10 1342586 | 301112013 Investing In Infrastructure: Are Insurers Ready To Fill The Funding Gap? Solvency II Clamps Down On Capital Charges Regulatory requirements--particularly those of the standard formula under the proposed EU Solvency II Directive--could challenge insurers' commitment to infrastructure investment, in our opinion. In September 2012, the European Commission (EC) publicly wrote to the European Insurance and Occupational Pensions Authority (EIOPA) explicitly mentioning infrastructure financing, asking the authority to examine "whether the calibration and design of capital requirements for investments in certain assets under the envisaged Solvency II regime necessitates any adjustment or reduction under the current economic conditions, without jeopardizing the prudential nature of the regime." In December 2013, EIOPA announced that it does not believe that modifications should be made for infrastructure investments, given that it lacks "comprehensive, reliable, and publicly available performance data" on which to base lower requirements. In our view, the question remains as to what extent infrastructure investment will be able to compete with less capital-intensive long-term government bonds under Solvency II. As of today, EIOPA has not introduced specific charges for infrastructure investments. Nevertheless, we believe the EC is likely to keep up the pressure on EIOPA to modify its proposals. Notwithstanding the standard formula calibration, we believe the effects of Solvency II on infrastructure investments may not only be negative (See "Solvency II Could Be A Double-Edged Sword For Infrastructure Investment," published on RatingsDirect.) We expect the larger insurers to make more investments in infrastructure than their smaller peers. Larger companies are more likely to leverage their diversification and internal modelling abilities to minimize the potentially onerous capital requirements of the standard formula under Solvency II. However, we believe it likely that internal models will be subject to stringent regulatory approval, and it remains to be seen whether regulators will accept models yielding capital charges that are significantly below those resulting from the standard formula. How Infrastructure Investments Affect Our Financial Strength Ratings As part of our analysis of an insurer, we assess how its investments in infrastructure affect its capital and earnings and the quality, diversification, and liquidity of its investment portfolio. We also assess how these investments affect the insurer's asset and liability management, investment and overall risk tolerances, and ability to operate within clear limits, supported by effective control systems. The risks arising from an infrastructure investment and their associated impact on an insurer's financial strength rating will largely depend on the nature of the insurer's exposure. This is because an insurer can invest in infrastructure projects through: Unlisted or listed equities in the infrastructure company, including private equity; Shares in investment funds; Rated or unrated bonds issued by the infrastructure company; and Privately placed loans and other direct investments. The following paragraphs outline the specific elements that we consider when evaluating an insurer's risk position, and WWW.STANDARDANDPOORS.COM/RATINGSDIRECT JULY 7, 2014 11 1342586 | 301112013 Investing In Infrastructure: Are Insurers Ready To Fill The Funding Gap? capital adequacy. Infrastructure Investments And Our View Of Risk Position To capture the potential volatility of an insurer's capital base, among other factors, we review the proportion of high risk assets in its investment portfolio relative to capital. Our assumption is that infrastructure investments are high-risk assets if effected through bonds and loans that are unrated or rated 'BB+' or lower; or through equity, partnerships, or alternative investments such as private equity. We regard the investment leverage as positive if an insurer is exposed to risky assets for less than 10% of its TAC (total adjusted capital) and negative if more than 100%. We apply different limits to insurers with significant profit-sharing liabilities that are able to transfer the risk to policyholders. When analyzing the risk position of an insurer, we also look at the insurer's exposure to a given asset sector or obligor. As per our global industry classification standard, we do not regard infrastructure investments as a separate category. Rating committees will therefore decide on a case-by-case basis whether a company's concentration should refer to infrastructure as an individual sector or whether it's more appropriate to classify the concentration according to the underlying sector of the project bond (construction or energy, for example). We regard sector concentration as positive when no more than 15% of the portfolio is held within any one sector, neutral (that is, moderately diversified) if between 15% and 30%, and negative if more than 30%. Independent of the type of asset, we also look at the exposure of the insurer to a given issuer. This takes into account the amount of equity, debt, and loan obligations issued by the same obligor. And when assessing the concentration to a single issuer, we consider any exposure to a given infrastructure project via different asset classes as one single obligor. We view the obligor diversification as positive if less than 5% of the assets are invested in one obligor, neutral if between 5% and 10%, and negative if more than 10%. Infrastructure Investments And The Impact On Capital Adequacy Standard & Poor's bases its overall opinion of an insurer's level of capital adequacy on insights drawn from its quantitative, risk-based capital model, in conjunction with more qualitative factors. The model determines the amount of capital in excess of reserves that an insurer needs to cover losses from disparate risks related to both assets and liabilities. Our capital model criteria do not define specific charges for infrastructure assets. Rather, we apply capital charges to those investments that reflect the underlying risk (market, credit, and/or asset-liability management (ALM)) of the instrument into which the insurer is investing. This means the charge we apply to infrastructure investments will depend on the specific asset class into which the insurer is investing. Consequently, the asset charges that we apply to infrastructure investments held by an insurer will depend on the position the insurer is taking in the infrastructure project (either directly or via a fund), on its credit quality, on the tenor of the investment if it has maturity, and on the effect of the ALM. Fixed-income securities The credit risk factor that we would apply to an infrastructure bond will depend on the specific rating level of the WWW.STANDARDANDPOORS.COM/RATINGSDIRECT JULY 7, 2014 12 1342586 | 301112013 Investing In Infrastructure: Are Insurers Ready To Fill The Funding Gap? instrument and the term to maturity. We determine these factors using our default studies. This means that the risk charges we apply to the nominal value of a project bond rated 'BBB' with a maturity of 15 years will be the same as those we apply to a bond issued by a financial institution or a government with same rating and maturity. For fixed-income securities, we also apply an ALM charge, which is regional and may be refined depending on our analysis of the insurer's enterprise risk management. The charge consists of two elements. First, our estimate of the divergence between asset and liability values, assuming they are mismatched by one year, for interest rate and spread movements associated with each confidence level. Second, our assumption of a duration mismatch between the insurer's assets and liabilities. For life insurers, this ranges between one and 10 years, depending on the market. Table 3 shows the charge we would apply at different confidence levels in our capital model to an investment in an infrastructure bond rated 'A' and in one not rated, with 10-20 years maturity and assuming two years duration mismatch. Table 3 Charges For Credit Risk--Bonds; 10-20 Years To Maturity; 2 Years Assumed Duration Mismatch (%) AAA AA A BBB 1. Rating: 'A' Credit risk charge 2.3 2.2 2.0 1.8 ALM charge 4.9 4.4 4.0 3.0 Total charge 7.2 6.5 6.0 4.9 2. Rating: Not rated Credit risk charge 25.8 24.6 23.3 21.2 ALM charge 4.9 4.4 4.0 3.0 Total charge 30.7 29.0 27.3 24.2 ALM--Asset liability mismatch. Source: Standard & Poor's. Equities and private equities We capture the risks associated with holdings in equity investments by applying volatility risk factors in our capital model that we derive for each geographic market. We charge investments in the equity capital of infrastructure projects, either direct or via funds, as we would any other equity investment. Table 4 shows the charge we would apply at different confidence levels in our capital model to an investment in the equity capital of an infrastructure project in the U.S., U.K., Australia, and Switzerland as per our criteria on the capital model. Table 4 Charges For Market Risk--Equities (U.S. U.K., Australia, And Switzerland) (%) AAA AA A BBB Volatility charge 47.0 42.0 38.0 27.0 Source: Standard & Poor's. For insurers investing in infrastructure projects via private equity, the charge applied is the regional equity market risk charge (the same as listed equities; see table 4), plus an incremental valuation and liquidity risk charge (see table 5). WWW.STANDARDANDPOORS.COM/RATINGSDIRECT JULY 7, 2014 13 1342586 | 301112013 Investing In Infrastructure: Are Insurers Ready To Fill The Funding Gap? Table 5 Charges For Market Risk--Private Equities (U.S., U.K., Australia, And Switzerland) (%) AAA AA A BBB Volatility charge 47.0 42.0 38.0 27.0 Incremental valuation and liquidity charge 16.0 14.0 13.0 10.0 Total charge 63.0 56.0 51.0 37.0 Source: Standard & Poor's. Unsecured loans Like fixed-income securities, we apply a default charge to unsecured loans (see table 6), which we determine through our cumulative default and recovery statistics. As with any other loan, we would assume in our capital model that one-half of the insurer's infrastructure loans are rated in the 'B' category and the remainder in the 'BB' category, with an outstanding duration of five years. In addition, we would offset the insurer's provision for bad debts or recovery against loans. Table 6 Charges For Credit Risk--Unrated Loans (%) AAA AA A BBB Loans 27.8 26.1 25 22 Source: Standard & Poor's. As per our criteria for our Risk-Based Insurance Capital Model (see "Refined Methodology And Assumptions For Analyzing Insurer Capital Adequacy Using The Risk-Based Insurance Capital Model," published June 7, 2010), when unsecured loans represent a material asset on the balance sheet, we can conduct additional analysis to refine the credit risk charge. The applicable risk charge is supported by our in-depth review of the insurer's portfolio, including the concentration per issuer/project/sector, duration, liquidity, and historical performance of the portfolio against other benchmark portfolios. We can also use our historical default and recovery statistics, subject to sufficient data. For example, we apply lower capital charges to U.S. commercial mortgage loans compared with unsecured loans because we've tracked and studied default rates on more than 30,000 U.S. commercial mortgage loans since 1993. The charge computation can also take into account data from the insurer's internal models, through our assessment of economic capital models. A Tempting, But Not Necessarily Straightforward Purchase Infrastructure development can potentially meet insurers' appetite for long-tenor, higher-yielding assets that provide a good match with their long-term illiquid liabilities. In our view, the projected infrastructure funding gap of 500 billion a year is likely to find increasing interest from insurers seeking better returns in the current low interest rate environment. However, these investments may not prove straightforward, and we believe regulation, difficulties in assessing risk, and the availability of suitable projects could dull insurers' enthusiasm for these assets. WWW.STANDARDANDPOORS.COM/RATINGSDIRECT JULY 7, 2014 14 1342586 | 301112013 Investing In Infrastructure: Are Insurers Ready To Fill The Funding Gap? Related Criteria And Research Related criteria: Insurers: Rating Methodology, May 7, 2013 Enterprise Risk Management, May 7, 2013 Management And Governance Credit Factors For Corporate Entities And Insurers, Nov. 13, 2012 Refined Methodology And Assumptions For Analyzing Insurer Capital Adequacy Using The Risk-Based Insurance Capital Model, June 7, 2010 Related research: U.S. Infrastructure Investment: A Chance to Reap More Than We Sow, May 5, 2014 Global Infrastructure: How to Fill A $500 Billion Hole, Jan. 16, 2014 Underwriting The Recovery: Insurers' Role As Investors Expected To Be Preserved, Jan. 14, 2014 How To Unlock Long-Term Investment In EMEA Infrastructure, Oct. 4, 2013 Project Finance Default And Recovery: Shale Gas Fuels Rise In U.S. Defaults, Aug. 9, 2013 Out of The Shadows: The Rise Of Alternative Financing in Infrastructure, Jan. 31, 2013 Under Standard & Poor's policies, only a Rating Committee can determine a Credit Rating Action (including a Credit Rating change, affirmation or withdrawal, Rating Outlook change, or CreditWatch action). This commentary and its subject matter have not been the subject of Rating Committee action and should not be interpreted as a change to, or affirmation of, a Credit Rating or Rating Outlook. Additional Contacts: Karin Clemens, Frankfurt (49) 69-33-999-193; karin.clemens@standardandpoors.com Michael J Vine, Melbourne (61) 3-9631-2102; michael.vine@standardandpoors.com Farooq Omer, CFA, Hightstown (1) 212-438-1129; farooq.omer@standardandpoors.com Insurance Ratings Europe; InsuranceInteractive_Europe@standardandpoors.com Infrastructure Finance Ratings Europe; InfrastructureEurope@standardandpoors.com WWW.STANDARDANDPOORS.COM/RATINGSDIRECT JULY 7, 2014 15 1342586 | 301112013 Investing In Infrastructure: Are Insurers Ready To Fill The Funding Gap? S&P may receive compensation for its ratings and certain analyses, normally from issuers or underwriters of securities or from obligors. S&P reserves the right to disseminate its opinions and analyses. 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