AMSTERDAM: The Dutch government’s pledge to increase defence spending to 3.5% of gross domestic product (GDP) by 2035 as part of its Nato commitments is already running into difficulty due to differences with some of the financial institutions it wants to help fund the plan.
Talks initiated by the Dutch Defence Ministry (MoD) in 2024 with big domestic insurance companies to explore a framework for potential defence investments have stalled over insurers’ requests for government help in screening defence companies.
Dutch insurers had a combined 455bil (US$531.44bil) in assets under management at end-March, including pension funds they own such as AZL, and Dutch dentists’ fund SPT, according to De Nederlandsche Bank data.
Yet the Dutch Insurers Association, representing the sector in the talks, said they lack expertise to perform due diligence in the secretive defence sector, while a spokesperson for the MoD said that screening investments remains the responsibility of investors.
“We need the government for this. Defence is a very untransparent industry for us and the government is the party that has all the context, the information needed to really make a good decision,” a spokesperson for the insurers’ association said.
The last substantive discussions with the government were held last September and no further talks have been scheduled, the association said.
The Netherlands spent around 2.2% of GDP on defence last year, and the MoD estimates that meeting the 3.5% target by 2035 will require extra defence spending of 16bil to 19bil a year.
The government aims to source roughly half of future defence purchases domestically and from European suppliers, to build up the country’s defence sector.
Dutch insurers have shown growing interest in the sector.
To become significant investors, however, they would need specific information about where a defence company sells to and details of all its products, to comply with their own environmental, social and governance (ESG) policies that prohibit investment in companies producing certain weapons or supplying certain countries, the association spokesperson said.
The MoD acknowledges that gathering information on suppliers can be difficult because of secrecy requirements and has launched a website compiling public information on suppliers, though the insurance industry said the material does not fully address its needs.
Another challenge for insurers investing in defence companies is that their risk and investment profile is better suited for fixed-income instruments, such as bonds and other forms of debt, analysts and the insurers’ association said.
“A government-issued defence bond could be a more natural investment. Fixed-income securities represent a much larger share of insurers’ portfolios than direct equity.
“A bond could therefore fit more easily,” the association spokesperson said.
Top Dutch insurers NN Group, ASR Nederland and Achmea combined had nearly 146bil in fixed-income portfolios as of end-June, with the largest portions allocated to government debt.
One solution, the association said, would be for the Netherlands to set up a sovereign debt tool, like France which is at the forefront of Europe’s defence push.
That could broaden the addressable pool of funds available to insurers, while also shifting the duty of vetting defence firms onto the debt issuer.
Last year, a French state-backed public investment bank BpiFrance launched two programmes: the 450mil Defence Fund targeting retail investors, and the 1bil European Defence Bonds aimed at institutional investors, with the aim of supporting French and European small and medium- size defence firms.
ASR made its first defence investment last year, in an undisclosed company, and said it is prepared to commit up to 100mil per transaction.
Achmea increased its defence exposure to 150mil in 2025 from 20mil and expects further growth.
ASR said it needs more information before making bigger investments.
Still, ASR’s own ESG rules, for example, only allow it to invest in defence companies based in the Netherlands and only in companies that do not supply high risk countries (as defined in the IRBC Framework on Controversial Weapons and Trade in Weapons with High-Risk Countries). — Reuters
