With a U.S. infrastructure investment gap of nearly $2.1 trillion looming over the next decade, insurers and reinsurers may be key to help closing it, Swiss Re asserts in a new report.
“The U.S. faces a sizable infrastructure investment gap that not only undermines its competitive standing among peer countries but also adds to the financial burden of its citizens and businesses, and can even lead to loss of life and massive economic damage,” Swiss Re said. “The [insurance/reinsurance] industry is well positioned to assist in closing the gap.”
It is an ongoing issue that has developed heightened attention in recent months considering that President Donald Trump wants to spend about $1 trillion on infrastructure improvements.
Swiss Re argued in its report that insurers and reinsurers can lobby government officials and private industry at various levels to boost investment in infrastructure including roads, bridges, water systems, dams and electrical grid, much of which was built more than 50 years ago. The reinsurer noted that significant pieces of the infrastructure is past its estimated functional lifetime.
Insurers and reinsurers are “well placed to move the current conversation forward,” Swiss Re said.
Swiss Re said that the interests of insurers and reinsurers are in play through multiple levels of government, so their opinions will have weight. Underscoring this, insurers and reinsurers have lobbied for infrastructure improvements in the past.
“The industry has championed initiatives from the establishment of fire departments and building codes to the promotion of stronger automobile standards such as airbags in cars,” Swiss Re said. “As a risk bearer from deficient infrastructure, the industry has a vested interest in recognizing, assessing and mitigating the risks presented by the infrastructure gap.”
Swiss Re added that insurer/reinsurer voices are key to addressing infrastructure shortfalls because they “have a deep understanding of the complex risks related to infrastructure assets and new construction projects.”
Insurance/reinsurance “is an important component of facilitating infrastructure investment, which in turn means better business opportunities for the industry,” Swiss Re said. “New infrastructure build requires [insurer/reinsurer] input from the construction stage to the management and operation of the resultant assets.”
Other reasons insurers/reinsurers can help lobby to address infrastructure shortfalls, according to the report:
The Swiss Re report noted that the U.S. spends 2.5 percent of its GDP on infrastructure compared to 3.9 percent in Canada, nearly 5 percent in Europe and 9-12 percent in China. As well, nearly 10 percent of 600,000 bridges in the U.S. were deemed in need of major repairs. Also, 33 percent of traffic fatalities stem, in part, from roadway conditions on the U.S.’s four million public roadways.
Swiss Re’s full report is called “Underwriting the U.S. infrastructure gap.”
Source: Swiss Re