EU competitiveness: how insurance can drive Europe's economic future
The Draghi Report estimates that Europe needs €800 billion per year for the green and digital transitions. The good news? Insurers manage €10 trillion in assets, which can be unlocked and put to work for Europe
Since the turn of the century, Europe has been grappling with a persistent slowdown in economic growth. Numerous strategies have been devised and implemented in a bid to stimulate growth, yet the overall trend has shown little improvement and the challenge of achieving sustainable, long-term growth remains a pressing concern.
There is general agreement that the EU’s competitiveness on the global stage depends on accelerating the green and digital transitions to meet the twin goals of decarbonising the economy and integrating advanced technologies into our industries. However, achieving such a transition requires significant financial resources.
European competitiveness and the role of insurance
According to Mario Draghi's report “The future of European competitiveness,” which lays out clear recommendations on how to boost economic growth, an additional €750 to 800 billion in annual investments would be needed to keep Europe competitive globally and achieve the green, digital, and social transitions.
The good news is that the insurance industry can play a significant role in facilitating this transformation, leveraging its expertise in risk management and long-term investment in addition to the over €10 trillion in assets it manages as a long-term investor. As such, insurers are well-positioned to direct these resources towards sustainable infrastructure, renewable energy projects, and technological innovations that enhance productivity and reduce environmental impact.
However, releasing this potential requires clearer regulatory frameworks, alongside public-private partnerships to mobilise the necessary financing. It is also crucial to establish a level playing field with other financial services actors that fully recognises insurers’ long-term horizon. In this framework, the Savings and Investment Union is a welcomed initiative to foster an investment culture in Europe, where citizens’ savings can be channelled into investments for the EU’s economy.
A stronger Solvency II to serve capital markets integration
Commenting on the completion of the EU’s single market in financial services, in an interview with Euractiv, Generali Group’s General Manager Marco Sesana highlighted that “a more integrated European insurance market could help with this. The more the capital markets in the European Union are liquid and big, the better.”
Discussing also the Solvency II framework, Sesana explained it can play a crucial role in enhancing the EU’s competitiveness, as it would free capital to be invested in the real economy and help boost investment in the private sector. For insurers, who have a significant investment capacity, it is essential that such capacity is deployed looking at the longer term.
“Solvency II is not just a regulation,” Sesana commented. “It impacts our ability to make a difference in the social and economic structure of Europe. The more we unlock the capacity of financial institutions to participate in the real economy, the better.”
As a leading insurer and asset manager, Generali is well positioned to contribute to the overall competitiveness of the EU with long-term investments also in real assets, such as infrastructure. The Group has invested more than €20 billion in infrastructure projects or direct financing for businesses with both private debt and private equity.
This also includes more than €6 billion in EU projects, for example through the Fenice 190 fund initiative, which is providing SME financing in Italy, France and Germany. More specifically, Generali’s investments include the construction of photovoltaic and wind power systems, installation of batteries, digitisation projects like data centres, and redesigning historic buildings – both in Italy and across Europe, such as the 500-year-old Procuratie Vecchie in St. Mark’s Square in Venice.
In addition, Generali has invested €16 billion in green, social and sustainable bonds as part of its long-term commitment to help the transition towards a more competitive but also more sustainable Europe. This implies preparing for future challenges such as demographic shifts, technological disruptions and, even more urgently, climate change.
Investing to close the protection gap
The growing protection gap, meaning the difference between insured losses and the actual economic damage caused by climate disasters, is an increasingly significant threat to communities, businesses – especially small and medium enterprises - and economies worldwide.
According to World Economic Forum estimates, climate change is projected to cause economic losses amounting to $12.5 trillion by 2050. In the same period, it is expected to result in approximately 14.5 million additional deaths with climate-induced impacts accounting for a further $1.1 trillion in extra costs to healthcare systems, creating a significant additional burden on already strained infrastructures and medical and human resources.
With its capacity to invest, manage risk, and innovate, the insurance industry has a pivotal role to play in helping to address and mitigate this impact. Nevertheless, as recently noted by Giulio Terzariol, CEO Insurance at Generali, “success will also depend on how well we work with policymakers and other sectors to fully leverage our industry’s potential and deliver tangible solutions that can make a difference.”
In this context, Terzariol highlights, “as weather hazards intensify due to climate change, risk assessment and insurance solutions need to keep up with the fast-evolving risk landscape and there is an urgent need for action by providing dedicated natural catastrophe (nat-cat) coverage and climate-adaptation insurance products.”
This is also about developing new insurance products tailored to cover emerging climate risks. Parametric insurance is one such example: it provides payouts based on predefined weather events, helping to quickly support affected communities and businesses.
Furthermore, financial inclusion programmes, improving access to insurance in underserved markets, play an important role in ensuring that vulnerable populations have the financial protection they need against climate-related disasters. Similarly, prevention measures are very important to decrease the level of risk exposure to natural disasters whilst helping to raise awareness, support risk mitigation and adaptation, minimise losses and promote greater sustainability.
“The time for concrete and practical solutions that address the ever-increasing climate protection gap is now,” concludes Terzariol. “Through the ‘Lifetime Partner 27: Driving Excellence’ strategy, Generali remains committed to addressing the climate protection gap, leveraging global expertise to drive innovation, enhance resilience, and contribute to a more sustainable future. By aligning strategic initiatives with the most pressing climate challenges, Generali is not only protecting its customers but also playing a leading role in shaping the future of insurance in an era of accelerating climate change.”
More information on the “Lifetime Partner 27: Driving Excellence” strategic plan is available here.
