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The importance of Public-Private Partnerships (PPP) was a key theme at the Global Insurance Forum. Here, Gary Reader, Global Head of Insurance at KPMG, discusses developments in PPPs, and the importance of collaboration between industry and governments.

According to Mr. Reader, there are many issues facing governments today, including climate change, resiliency of infrastructure, and economic stability. Given the risks associated with these issues and the potential cost to mitigate them, there is a protection gap. “The reality is that no public body or government has the resources to address this gap.” Mr. Reader says the cost to insure these risks would be prohibitive. He suggests governments and the insurance industry work together to find solutions.

Mr. Reader says the insurance industry has taken the lead on PPPs. In fact many companies have signed the UN’s Principles for Sustainable Insurance, and attended the UN Insurance Development Forum. It demonstrates that the industry is willing and wanting to engage in these issues.

In a report titled: Demystifying the public private partnership paradigm, KPMG describes how the insurance industry and governments can work together and achieve insurance sustainability and growth.

Mr. Reader says the goals of policymakers and governments are to protect their citizens and take risk off the country’s balance sheet. The insurance industry brings a deep understanding around risk and risk management, which can help address the risks governments face.

According to Mr. Reader, three main objectives achieved by PPPs are to:

  1. provide patient capital – investing in long term capital projects.
  2. leverage the insurance industry’s deep risk management experience to help develop solutions to issues facing governments.
  3. facilitate risk transfer

Mr. Reader suggests insurance companies and policymakers collaborate and remain open minded when it comes to PPP projects. “PPPs demand innovation and new thinking, and the industry and government bodies need to be less cautious.”

The growth opportunity is enormous for the insurance industry. Mr. Reader believes “the protection gap is probably trillions of dollars, and is both a developing and developed markets issue…The industry is not short of opportunity in this space.”

For more of our coverage of the IIS Global Insurance Forum, visit the WRIN.tv On Demand Library.

 

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