ASEAN’s Insurance Industry Primed to Drive Infrastructure Development Through Alternative Investment Funding
The ASEAN Insurance Council (AIC) called on industry stakeholders throughout ASEAN to take an active role in driving local and regional economic growth by funding critical infrastructure developments through private-public partnerships at the recent World Economic Forum in Davos.
The projection is that ASEAN’s infrastructure development will require as much as US$3.1 trillion in investment by 2030. Malaysia comes in fourth highest after Thailand, with a total of US$30 billion of expected annual infrastructure spending.
Evelina Pietruschka, Secretary General of the AIC, firmly believes that the ASEAN insurance industry can play a key role in meeting that need. “The ADB estimates that ASEAN requires up to US$60 billion additional investment annually to bridge the current infrastructure investment gap. That’s a huge figure for governments to fund alone. ASEAN’s insurance industry is perfectly positioned to help meet this need through innovative public-private partnership in infrastructure investment. The AIC believes we can shape the future of our nations and region by funding investments in key infrastructure developments that contribute to the realization of the Sustainable Development Goals (SDG).”
According to BMI Research, Malaysia offers one of the best returns at low risks for investments among the emerging economies in the Asia-Pacific region’s fast-growing infrastructure sector. With a population of over 630 million, increasing urbanisation and an affluent middle class, government will need to partner with businesses to deliver on the critical infrastructure projects in the transport, healthcare, energy, food and education sectors.
Take for instance the Singapore-Kuala Lumpur high speed railway project. It is one of the projects that helped boost Malaysia’s industry rewards score to 68.6 out of 100, the third highest among ASEAN members. The project will generate enhanced stimulus and growth effects, and at the same time drive other sectors such as education, jobs, wages and wealth.
Despite substantial progress in recent decades, the Asian Development Bank (ADB) estimates the region is still home to over 400 million people who have no or limited access to electricity, 300 million who lack safe drinking water and almost a billion people without basic sanitation facilities.
Globally, insurance companies are estimated to hold just 2% of assets under management in infrastructure investments. Yet with insurance premiums in ASEAN growing at an average annual rate of 13% between 2004-2014, three times the global average, the potential to channel investments to viable infrastructure projects offers a rewarding opportunity.
A study by global consulting firm PricewaterhouseCoopers on Understanding Infrastructure Opportunities in ASEAN analysed ASEAN’s infrastructure investment landscape, concluding there was a direct and positive correlation between infrastructure investment and GDP growth. According to Evelina Pietruschka, that springboard for inclusive and sustainable economic growth represents a mutually-beneficial prospect for both insurance companies and ASEAN member states.
“Public-private partnership to fund infrastructure development offers an innovative alternative approach to realise the substantial benefits for insurance companies in ASEAN. Not only do long-term infrastructure investment horizons provide the ideal complement to the industry’s own investment timeframes, these projects also help stimulate positive growth for national and regional economies. The use of local currency by the local insurance players to fund these investments are also a huge benefit to currency fluctuations and national debt levels,” said Evelina.
According to Evelina, the AIC firmly believes that building mutually beneficial public-private partnerships to fund infrastructure development begins with a shared objective to improve the lives of the people. To highlight the benefits of this blended financing approach, the AIC plans to be the bridge to drive conversations between ASEAN’s member states and their local insurance companies to catalyst vital investments into infrastructure projects throughout ASEAN.
The AIC was founded in 2003 following unanimous consent voiced at a Meeting of the Council of the ten ASEAN member states in Hanoi, Vietnam with the goal of supporting development of insurance and reinsurance in ASEAN, promoting regional cooperation and championing ASEAN’s insurance industry. Today, that mission provides the framework through which the AIC seeks to highlight the opportunity for insurance companies to drive impact investments that will provide a positive multiplier to wider regional growth, including providing blended funding options to national infrastructure projects.
About the AIC
The ASEAN Insurance Council (AIC) aims to promote the development of insurance and reinsurance in ASEAN, with due respect to the aspirations, laws and regulations of member countries. As an organisation, the AIC is keen to inform, support and champion the ASEAN insurance industry and its constituent members, promoting a positive landscape that encourages and enables success in all areas of insurance and reinsurance.