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Insurers have role to play in infrastructure investment

Released at: 14:40, 06/02/2018

Insurers have role to play in infrastructure investment

Photo from baocongthuong.com.vn

ASEAN Insurance Council tells WEF meeting in Davos of potential offered by public-private partnerships involving regional insurance companies.

by Hai Van

At the recent World Economic Forum in Davos, the ASEAN Insurance Council (AIC) called on industry stakeholders throughout ASEAN to take an active role in driving local and regional economic growth by funding critical infrastructure developments through public-private partnerships (PPPs).

The projection is that ASEAN’s infrastructure development will require as much as $3.1 trillion in investment by 2030, and Ms. Evelina Pietruschka, Secretary General of the AIC, firmly believes that ASEAN’s insurance industry can play a key role in meeting that need.

“The Asian Development Bank (ADB) estimates that ASEAN requires up to $60 billion in additional investment annually to bridge the current infrastructure investment gap,” she said “That’s a huge figure for governments to fund alone. ASEAN’s insurance industry is perfectly positioned to help meet this need through innovative PPPs in infrastructure investment. The AIC believes we can shape the future of our nations and region by funding investments in key infrastructure developments that contribute to the realization of the Sustainable Development Goals (SDG).”

With a population of over 630 million, increasing urbanization and an affluent middle class, ASEAN governments will need to partner with businesses to deliver on critical infrastructure projects in the transport, healthcare, energy, food, and education sectors.

Despite substantial progress in recent decades, the ADB estimates the region is still home to over 400 million people with no or limited access to electricity, while 300 million lack safe drinking water and almost 1 billion are without basic sanitation facilities.

Globally, insurance companies are estimated to hold just 2 per cent of assets under management in infrastructure investments. But with insurance premiums in ASEAN growing at an average annual rate of 13 per cent between 2004-2014 - three times the global average - the potential to channel investments to viable infrastructure projects offers a rewarding opportunity.

A study by global consulting firm PwC, Understanding Infrastructure Opportunities in ASEAN, concluded there was a direct and positive correlation between infrastructure investment and GDP growth. According to Ms. Pietruschka, that springboard for inclusive and sustainable economic growth represents a mutually-beneficial prospect for both insurance companies and ASEAN member states.

“PPPs to fund infrastructure development offer an innovative alternative approach to realize the substantial benefits for insurance companies in ASEAN,” she said. “Not only do long-term infrastructure investment horizons provide the ideal complement to the industry’s own investment timeframes, these projects also help stimulate positive growth for national and regional economies. The use of local currency by local insurance players to fund these investments is also a huge benefit to currency fluctuations and national debt levels.”

The AIC, she went on, firmly believes that building mutually beneficial PPPs to fund infrastructure development begins with a shared objective to improve the lives of the people. To highlight the benefits of this blended financing approach, the AIC plans to be a bridge in driving conversations between ASEAN member states and local insurance companies to catalyst vital investments into infrastructure projects throughout ASEAN.

The AIC was founded in 2003 following unanimous consent at a Meeting of the Council of the ten ASEAN member states in Hanoi and aims to support the development of insurance and reinsurance in ASEAN, promote regional cooperation, and champion ASEAN’s insurance industry. Today, that mission provides the framework through which the AIC seeks to highlight the opportunities for insurance companies to drive impact investments that will provide a positive multiplier to wider regional growth, including providing blended funding options to national infrastructure projects.

It also pays due respect to the aspirations, laws, and regulations of member countries. As an organization, the AIC is keen to inform, support and champion the ASEAN insurance industry and its constituent members, promoting a positive landscape that encourages and enables success in all areas of insurance and reinsurance.

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