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Insurers key to mobilising long-term capital for climate risk-resilient projects: GA

12th October 2018 - Author: Charlie Wood

The insurance industry plays a key role in de-risking infrastructure and mobilising long-term private capital to climate risk-resilient infrastructure, according to a top officials speaking at the Geneva Association’s 2018 Extreme Events and Climate Risk forum in Toronto.

Those in attendance included Patricia Espinosa, Executive Secretary of the United Nations Framework Convention on Climate Change; Joaquim Levy, Chief Financial Officer of the World Bank; and Mami Mizutori, Assistant Secretary General and Special Representative of the UN SG for Disaster Risk Reduction.

The GA, an international insurance think-tank, says forum participants stressed the importance of public policy and regulation at all levels of the government to make climate resilience a prerequisite for a infrastructure projects’ life cycle.

Furthermore, participants indicated that governments play a critical role in implementing risk reduction measures such as land-zoning to avoid building in high-risk zones, upgrading and enforcing building standards, and recovering and maintaining natural infrastructure such as wetlands.

The GA says emerging technologies are leading to “smart green” infrastructure systems with changing risk profiles which must be assessed and allocated between governments and the private sector.

Forum participants concluded that institutional investors should engage with non-life insurers to reduce the risks associated with the projects, thus improving risk-adjusted returns and making infrastructure investments more attractive.

“Investing in infrastructure could offer insurers a good match with long-term liabilities and enhanced portfolio diversification,” stated Anna Maria D’Hulster, Secretary General of The Geneva Association.

“However, at a global scale there is limited clarity regarding public policy, funding instruments and valuation methodologies, amongst other factors, that discourage institutional investors to commit to scaling-up their capital allocation to infrastructure projects.”

“In many countries almost no consideration has been given to assessing physical climate risk on critical infrastructure projects and incorporating this risk across the projects’ life cycle,” added Maryam Golnaraghi, Director Extreme Events and Climate Risk at The Geneva Association.

“Institutional investors require a stable regulatory framework, a pipeline of investment-grade projects, and an efficient market. Life insurers, in their capacity as long-term asset managers, and non-life insurers, with their risk assessment, pricing, and risk transfer expertise, are well positioned to contribute to addressing these challenges.”

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