Dutch Insurers Hold Back as Defence Spending Plans Face Funding Hurdles

Post by : Saif

Netherlands is facing difficulties in attracting domestic insurance capital to its defence industry as the government prepares to sharply increase military spending under its NATO commitments.

The Dutch government has pledged to raise defence spending to 3.5% of GDP by 2035. However, discussions between the Defence Ministry and major Dutch insurers over potential investments have stalled.

A key disagreement is over how defence companies should be screened before insurers invest in them.

Insurers Seek Government Support

Dutch insurers say they do not have enough specialist knowledge to properly assess defence companies because much of the industry operates under strict secrecy.

The Dutch Insurers Association has asked the government to provide more information about defence companies, including where their products are sold and which countries they supply.

Insurers say this information is important because their environmental, social and governance policies restrict investment in certain weapons and companies connected to high-risk countries.

The Defence Ministry, however, maintains that investors are responsible for conducting their own screening.

Billions Needed for Defence Spending

The Netherlands spent around 2.2% of GDP on defence last year. Government estimates suggest reaching the 3.5% target could require an additional €16 billion to €19 billion each year.

Officials also want around half of future defence purchases to come from Dutch and other European suppliers. The strategy is designed to strengthen domestic manufacturing and reduce dependence on defence suppliers outside Europe.

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Insurers Prefer Defence Bonds

Another obstacle is the type of investment insurers prefer.

Insurance companies generally hold large amounts of fixed-income assets such as government bonds and corporate debt. Direct investment in defence companies can involve greater risks and may not fit easily into their existing portfolios.

The Dutch insurance sector has therefore suggested that the government consider issuing a defence bond.

Such an instrument could allow insurers to support defence spending through debt investments while leaving the responsibility for screening individual defence companies with the issuer.

France has already introduced similar financing initiatives to attract private and institutional investment into its defence industry.

Dutch Insurers Increasing Defence Exposure

Despite the challenges, some Dutch insurers have already started increasing their exposure to the defence sector.

ASR Nederland made its first defence investment last year and has indicated that it could commit up to €100 million per transaction.

Achmea increased its defence investments to around €150 million in 2025, compared with €20 million previously.

NN Group has also changed its investment approach to support parts of the European defence supply chain, including military technology, infrastructure, equipment and aerospace.

However, individual insurers continue to face restrictions under their own ESG policies.

Limited Market Creates Another Problem

Even if the government and insurers reach an agreement, the Dutch defence industry may not currently offer enough large-scale investment opportunities for major institutional investors.

The Netherlands has companies involved in naval shipbuilding, radar systems, drones, military technology, satellite systems and defence components.

Major players include Damen Naval, Thales Nederland, GKN Fokker, Airbus Netherlands and VDL Group.

However, the country's defence industry generated around €10.2 billion in revenue in 2025, considerably smaller than defence markets in countries such as France, Germany, Italy and Britain.

Defence Companies Need to Expand Quickly

Industry officials say Dutch defence manufacturers will need to significantly increase production to meet the government's spending plans.

A PwC Netherlands estimate suggests that around €62 billion could be spent on defence equipment by 2030, with approximately €41 billion potentially going to Dutch manufacturers through direct and subcontracting arrangements.

The country has around 400 domestic companies producing defence components and systems. Industry representatives estimate that their combined production capacity may need to increase three to four times by 2030.

New Financing Could Help Smaller Companies

Hans Huigen, chief executive of the Dutch defence industry association NIDV, has suggested that a fund worth between €300 million and €500 million could provide loans to companies looking to expand.

Such financing could help smaller manufacturers increase production and take advantage of rising defence demand.

However, the limited size of the Dutch defence market remains a concern for investors.

For now, Dutch insurers appear interested in supporting the country's defence expansion but want clearer information, suitable financial products and stronger government involvement before committing significantly larger amounts of capital.

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