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Insurance companies Phoenix and Clal's decision to take part in the financing for Route 431 from Nes Tziona to Modi'in is a milestone in financing infrastructure and could prove the shot in the arm that currently-stuck projects need.

Until a decade ago, insurers invested life insurance premiums in designated bonds; but since then, major changes have taken place in the sector. The state has stopped issuing the designated bonds and the companies were sent out to invest on the open market. Recently, the insurance companies' level of freedom was increased and they can now distribute a substantial scope of investments over a variety of areas.

In recent years, insurance companies have tried their luck in a variety of new investment areas and the experience hasn't always been successful. Migdal tried its hand in the household credit market a few years back, aggressively marketing car loans and mortgages. The results was tens of millions of shekels in doubtful debt and a much higher than usual rate of default than in the banking sector. Migdal learned the hard way that granting credit is a profession like any other and not everyone with resources knows how to use them wisely.

Insurers have taken a few hits in the real estate sector as well. Phoenix and Hadar bought a plot on Tel Aviv's Rothschild Boulevard 10 years ago, planning to build an office tower. The project bounced from one zoning board to the other for several years and construction began just a few months ago. "We lost our pants on that deal," Phoenix CEO Bar Kochva Ben-Gera recently admitted.

Ben-Gera's math is simple: Those $13 million were grounded on the lifeless plot. Invested in another instrument, they would have been creating value for the company.

Other companies also made odd investments in real estate in recent years. One of the more prominent is Migdal and Malibu Construction's acquisition of a 5.6 dunam plot, for which the companies paid NIS 200 million in 2000. Migdal has already written off a few tens of millions of shekels on its balance sheet on depreciation on the plot.

Losses are part of business life and these failures and others shouldn't prevent insurance companies from making other investments. But they do serve as a reminder that insurers' entry into infrastructure financing and other areas must be done professionally, using advanced risk management models, recruiting credit professionals and developing divisions that specialize in the relevant fields. These moves are required especially in light of the fact that even the banks have trouble analyzing and estimating the credit risk and economic feasibility of long-term projects.