LONDON, June 2 (Reuters) - The Bank of England (BoE) willscrutinise whether insurers are taking on too much risk byinvesting in infrastructure projects which may not be suitablefor traditional portfolio management, it said on Tuesday.
Insurers have been coming under pressure from policymakersto invest in economic growth through building new roads, bridgesand telecoms networks, projects which can offer higher yieldsthan government bonds.
Any suggestion that insurers should not invest in suchprojects could endanger a 315 billion euro ($346 billion)European Commission plan for loans to infrastructure and smallbusinesses.
These infrastructure investments can be attractive toinsurers, but present "idiosyncratic risks" that are notsuitable for traditional portfolio level management alone, saidAndrew Bulley, director of life insurance at the BoE'ssupervisory arm, the Prudential Regulation Authority (PRA).
New European Union insurer solvency rules that come intoforce next January will help the sector judge whether to investin infrastructure, Bulley said in a speech in London.
He said the PRA was "neutral" on whether insurers shouldincrease their exposure to the sector, but said: "We shallcontinue to review the evidence as the new regime beds down."
As banks rein in lending following the financial crisis,governments are turning to the vast pools of money held byinsurers, hoping they can be put to work to boost economicgrowth.
Legal & General, for example, has allocated 1.5billion pounds ($2.3 billion) to a British infrastructure fundand is seeking external financing to expand the fund to 15billion pounds. ($1 = 0.6564 pounds)($1 = 0.9111 euros) (Reporting by Huw Jones and Carolyn Cohn; editing by DavidClarke)