What You Need to Know
- U.S. insurers now have about $570 billion in infrastructure investment exposure.
- The American Society of Civil Engineers predicts the U.S. will need about $2.6 trillion in additional funding for infrastructure projects.
- From 2010 through 2020, the average cumulative default rate was 13.8% for nonfinancial, non-infrastructure bonds and 1.1% for infrastructure bonds.
State insurance regulators are at the beginning of a process that could eventually make investing in infrastructure projects more attractive to life and annuity issues.
Teams at the National Association of Insurance Commissioners have started the gears turning by preparing a look at U.S. insurers’ infrastructure investments, and on the possibility that U.S. insurers could help to fill infrastructure funding gaps.
Analysts at the NAIC’s Center for Insurance Policy & Research and the NAIC’s Capital Markets Bureau reported that U.S. insurers now have about $570 billion in exposure to infrastructure-related assets.
The American Society of Civil Engineers is predicting that the United States will need about $2.6 trillion in additional funding to pay for infrastructure projects, such as projects involving the construction or repair of transit systems, stormwater systems, dams and flood control levees.
What Your Peers Are Reading
“If the investment gap is not adequately addressed, across sectors, the expected outcome is $10.3 trillion in forgone gross domestic product (GDP), more than 3 million fewer jobs, and $2.4 trillion in reduced export,” the NAIC analysts write.
The United States is on track to record about $23 trillion in GDP, or national income, this year. The infrastructure funding gap impact forecast implies that the gap could cut overall GDP by about 4% per year over the next decade.
The NAIC analysts estimate that the world now has a total of about $6.6 trillion in infrastructure investments of all kinds.
U.S. insurers account for about 8.6% of that total.
Insurers face many different risks when they invest in infrastructure, such as liquidity risk and facility maintenance risk, but overall, the risk infrastructure borrowers will default is low, the analysts say.