A joint effort to boost the European recovery

DISCLAIMER: All opinions in this column reflect the views of the author(s), not of EURACTIV Media network.

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Philippe Donnet. [Generali]

In 2021, Generali celebrates its 190th anniversary. It is not only a significant milestone that few companies can boast, but also an opportunity to honour our history by continuing to play an ever-increasing active corporate citizenship role that goes beyond our day-to-day business.

Philippe Donnet is the CEO of the Generali Group.

Generali’s purpose, as one of the largest global insurance and asset management companies, is to enable people to shape a safer future by caring for their lives and dreams. We aim to be a Lifetime Partner for our customers, be those individuals, families or businesses, and we take part in the communities in which we operate.

We underlined this commitment in March last year, during the most critical phase of the Covid-19 crisis, when we promptly launched an Extraordinary International Fund of €100 million to fight the pandemic.

More recently, as part of the initiatives for our 190th anniversary, we presented our flagship investment program “Fenice 190”, which aims to contribute to the relaunch of the European economy while putting sustainability at the core.

Our plan is to invest a total of €3.5 billion over the course of five years through a number of investment funds focusing on infrastructure, innovation and digitalization, SMEs, green housing, health care facilities and education. We have already deployed €1 billion in 2020.

I am proud to say, this is the spirit of Generali.

Protecting against future risks

One of the lessons we learned last year is that Europe – and the whole world – was not prepared to face a pandemic of such magnitude. Therefore, to make sure we can tackle successfully any systemic crisis that might arise in the future, we – the private sector, the European institutions, Members States – all need to work together.

This also means developing the right tools to support companies in the face of the hardship they often have to endure in these cases. As an example, the lockdown and strict containment measures imposed by governments to tackle Covid-19 forced many SMEs to cease their activities and caused widespread cancellation of events and travel, which resulted in considerable business interruption losses that were largely uninsured or insured only partially (the so-called “Protection Gap”).

From a technical point of view, pandemic coverages pose challenges to the basic principles of insurance such as diversification and mutualisation of risks. In addition, there is no clear, predictable time limit on a pandemic: this means the potential loss could be infinite, and therefore uninsurable under the traditional insurance business model.

As such, the risk from a pandemic cannot be held by the private insurance and reinsurance industry alone, meaning we have to find innovative and shared solutions.

Our proposal is to develop a multi-layered anti-pandemic fund, bringing together European institutions, member states, and the most relevant insurance and reinsurance companies to create forms of public-private partnerships and future risk protection mechanisms. I have personally championed this cause and have been discussing it both with national and European lawmakers.

Firing up the recovery

That same spirit of partnership, I believe, must be applied to relaunch the economy. The European insurance industry has €11 trillion of assets under management, and Generali alone accounts for over €660 billion: we have enormous firepower, a sound expertise as seasoned institutional investors and a crucial role to play to support the recovery.

I believe investment projects such as our “Fenice 190” are a good example of this, and the impact of these initiatives could be even bigger if other companies or institutions decide to co-invest in them. We hope this will soon be the case.

Furthermore, insurers can support the EU ambition to make Europe the first climate-neutral continent. However, to do so, it is key to ensure the right policy environment that can stimulate investments in long-term and sustainable projects.

The Solvency II Directive – which is currently under review – is a key instrument for freeing up capital and directing it towards projects in line with the Commission’s political agenda such as the Green Deal, Capital Markets Union and more generally long-term investments that can support the economic recovery.

This is why we have elaborated a proposal – within the Solvency II framework – to treat “Green Bonds” as a specific asset class, in light of their different nature and related risks compared to other types of bonds.

The idea is to consider separately “Long-term Green Bond Investments” with decreasing capital charges for longer holding periods. This would prevent in-and-out trading, thus favouring a long-term holding.

Again, we already shared this proposal with the European Commission, together with the one relating to the Pandemic Risk Pool.

I believe that 2020 was a landmark year for Europe. In the face of the crisis, Member States came together to create a historic and innovative settlement with NextGenerationEU and the Recovery Plan; now, it is about delivering on this.

As one of Europe’s leading financial institutions, Generali is ready to engage in public-private partnership that can help boost the recovery and make the European economy stronger, more resilient and more sustainable for many years to come.

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