Swiss Re says insurers have opportunity in emerging markets post COVID-19 crisis

Emerging market infrastructure projects will likely generate a premium opportunity of more than $50 billion for the re/insurance industry in a post COVID-19 world, according to Swiss Re.

A new report by Swiss Re Sigma suggests that emerging market infrastructure represents an annual investment opportunity of $920 billion for long-term investors, including insurers.

Investment in infrastructure development is set to be one of the main drivers of sustainable growth in the emerging markets after the COVID-19 crisis subsides, according to sigma. The energy sector, in particular renewable energy, smart and resilient infrastructure, and healthcare facilities are expected to attract strong investment.

According to the report, the construction and operational phases of infrastructure projects will generate new demand for insurance solutions, benefiting the engineering, property and energy lines the most.

In the engineering line, the construction-all-risk premiums are estimated to be $22 billion. In the operation phase, property premiums are estimated to reach $19.4 billion, while premiums from renewable energy projects will be around $9.7 billion.

The report stated that there will also be increased demand for marine and liability insurance.

The assumptions are based on projected levels of investment across the largest seven emerging markets - Brazil, China, India, Indonesia, Mexico, Russia, and Thailand.

Swiss Re noted that China will be where most infrastructure-related insurance business is concentrated, accounting for 60 percent of the premiums over the coming decade. It said China is "on course to be the world’s biggest insurance market by the mid-2030s".

According to estimates in the report, emerging markets will invest $2.2 trillion in infrastructure annually over the next 20 years.

“Spending on infrastructure could be one of the ways to kickstart parts of the economy after the COVID-19 pandemic and help drive strong and sustainable growth over the next decade," said Jerome Jean Haegeli, group chief economist at Swiss Re. “Most infrastructure spending will be in emerging Asia, which we also expect to be the engine of global economic growth."

Russell Higginbotham, Swiss Re chief executive officer reinsurance Asia, added that “In the coming years, Asia will invest more in infrastructure than anywhere else in the world, with the region’s emerging economies accounting for more than a third of associated spend. Critically, infrastructure will enable sustainable growth by fostering improved productivity; while rising incomes and a continuing trend of urbanisation will mean that the composition of infrastructure needs will also evolve."