'Spend smarter rather than faster' to tackle infrastructure gap, says Swiss Re's Jérôme Jean Haegeli

It is time to start spending smarter rather than faster if we want to close the infrastructure gap. The re/insurance industry can play a substantial role in this process by breaking down the barriers of investment for high-quality infrastructure and the secure deployment of assets.

This was one of the main takeaways from an interview on the theme of closing the infrastructure gap with Jérôme Jean Haegeli, group chief economist of Swiss Re. The discussion took place on Intelligent Insurer’s Re/insurance Lounge, an online platform where interviews and panel discussions are available on demand.

“Long-term economic renewal is going to take far more than just a shot in the arm, and if COVID-19 has shown us anything, it is that we need better planning in economic policies,” said Haegeli.

“The pandemic’s effect on the world will come to an end but infrastructure will require urgent and ongoing investment,” he added.

In a joint Swiss Re Institute blog with Makhtar Diop, vice president for infrastructure at the World Bank Group, Haegeli explored how investment in sustainable infrastructure will help avert the worst consequences of climate change and pandemics. It also highlighted the fact that sustainable development is an important source of economic growth and social progress.

“We have tried to create a roadmap of how to move towards economic resilience in this report and if COVID-19 has shown us anything, it is that better planning is needed in economic policies and that we need to spend smarter by investing in infrastructure,” said Haegeli

“If we spend more on infrastructure, we will do a lot more for economic revival,” he added.

Pillars of society

Haegeli explained that broader infrastructure investment is about far more than just building roads and bridges, it is about infrastructure spent on building hospitals, public schools, and networks—the basic pillars of society.

“We need to build back better with public-private partnerships, and lower the barriers for investment infrastructure,” he said.

“If you look at insurance companies in Europe, they spend less than 1 percent of investment on infrastructure because it is more difficult to deploy.”

The report notes a lack of bankable projects for emerging markets and developing economies which is linked to limited capacity to prepare, plan, and prioritise those that would be attractive to private investments.

Haegeli said that given long-term liabilities and enough long-term capital to commit, institutional investors such as pension funds, banks or insurance companies are ideally positioned to play this role.

He added that the re/insurance industry can play a vast role in this process—insurance companies control and deploy $13 trillion of assets, plus interest rates are low and likely to remain so. On the underwriting side the industry’s expertise is needed for the secure deployment of assets.

“To achieve this, we need to break down the barriers of investment in bankable projects which include sustainable high-quality infrastructure, and here we propose more application of best practices,” he concluded.

To see the full Re/insurance Lounge interview  click here.