Swiss Re outlined how both re/insurers and the U.S. economy have been feeling the weight of higher claims and business costs as poor infrastructure bogs economic growth and lessens quality of life.
Low infrastructure investment translates into high economic costs as businesses, who are left to pick up the bill, gradually lose their competitive edge.
Swiss Re quoted the Bureau of Economic Analysis, stating “the average age of all government-owned fixed assets in the country reached 24 years in 2015.”
As an example of real-time economic impact to business, Swiss Re said the freight transport industry alone was hit with additional cost estimates of $27 billion, “because of the poor conditions of roads and other surface transportation infrastructure.”
Waters systems deterioration accounts for about 240,000 water breaks which causes property damage, business interruption, expensive repairs, and public health problems, said Swiss Re, further highlighting the strain poor infrastructure places on both re/insurers and economic development.
These figures are not surprising with the U.S. spending well-below the developed world’s average; “as a share of GDP, the US spends only 2.5% on infrastructure, compared to 3.9% in Canada, Australia, and South Korea, close to 5% in Europe, and between 9-12% in China.
“As a result, the competitiveness of the US suffers – based on the World Economic Forum’s 2016 Global Competitiveness report, the nation’s quality of overall infrastructure doesn’t even rank it in the top 10 among world economies,” Swiss Re said.
The U.S. infrastructure problem has grown to such a proportion that its become a top political priority; the Trump regime has promised to fix the infrastructure dilemma, although no concrete plans have yet been released.
Swiss Re said re/insurers can offer expertise, investment capacity, and risk transfer solutions from start to finish of the development, construction, and eventual infrastructure usage: “The re/insurance industry is well positioned to assist in closing the gap. Re/insurers can engage in dialogue with stakeholders at various levels of government and private industry.
“As a risk bearer from deficient infrastructure, re/insurers have a vested interest in recognizing, assessing, and mitigating the risks presented by the infrastructure gap.
“Furthermore, re/insurers have a deep understanding of the surrounding complex risks and can therefore play a role in enabling the construction of new infrastructure assets. Closing the infrastructure gap would benefit the entire national economy and facilitate the economy of the future.”