Photo Credit: United Nations
Public-private partnerships fit well into many sectors and industries, most obviously infrastructure and social services. But I never connected PPPs to the life insurance sector until I read a recent online interview with Andreas Gruber, the Chief Investment Officer of Allianz, a German insurance and asset management company. In the interview, Gruber gives a lucid assessment of PPPs and why they are important to Allianz.
It boils down to this: long-term investments in infrastructure assets, which he describes as “long-term necessities” as opposed to “short-term wants,” provide stable returns over the long run. This makes them well-suited to Allianz’s business strategy and the needs of its customers.
In his own words:
“As life insurers, we have a tremendous responsibility to our customers. They are counting on us and are paying premiums with the expectation of receiving an attractive and stable income over what will hopefully be a very long retirement period. Infrastructure offers long-term, predictable cash flows to match these extended liabilities. With bonds offering zero and even negative interest, infrastructure is becoming an ever more interesting asset class.”
He also points out that there is an important social aspect of PPPs: modernizing infrastructure is an important part of fighting climate change. Governments, he notes, don’t always have the resources to upgrade aging infrastructure themselves. Hence the positive role the private sector can play through PPPs.
Gruber is upbeat on the private sector contributing to infrastructure projects, saying they will help keep them on time and within budget. He also believes that potential risks can be managed through sensible incentive programs and regulations. The entire interview is well worth reading.