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Insurers Account For A Third Of Major Lenders

Insurance companies now make up a third of major lenders in the UK real estate market, as they continue to grow their presence.

Insurers account for nine out of the market’s 28 big ticket lenders and Savills’ 2016 Financing Property report states that the following companies all originated and held two or more real estate loans more than £100 million in the year up to March 31: TIAA Henderson, Rothesay Life, Pricoa, MetLife, M&G Investments, Legal & General, ING, Aviva and AIG.

In the big ticket market, the number of insurers now eclipses the six German banks, four US investment banks, four UK clearing banks, three alternative lenders and two other international lenders.

In the UK real estate market, the activities of insurance companies have gone up significantly over the course of the last four years, lending £8.6 billion between them last year, which is a 58.5% rise on the previous year and a 238.2% increase over the last four years.

In order to make sure that they match their yearly liabilities with interest paid by landlords, normally through long term deals, insurers have increased their activity in the real estate market.

Insurance firms have gained their share in the market from traditional bank lenders, who have reduced their lending rates since the financial crisis.

Senior Director at Savills’, William Newsom, who is the report’s author, said last year that the real estate lending market in the UK was in a ‘goldilocks period’, where it was not ‘too hot or cold’/

However he added that in last year’s final quarter, they witnessed an increase in margins and a fall in LTV ratios.

Meanwhile, it has also been suggested that a potential Brexit from the European Union has caused foreign real estate investment firms to ‘pause’ on investments in the UK property sector, at least until after the vote on June 23.

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BDC 316 : May 2024