Sesana believes a more integrated European insurance market could help with the transition. He tells Euractiv, that the more the capital market in the European Union is liquid and bigger, the better. There is, he says, still a lot to be done.
JB: How can the EU improve its competitiveness in the global market, particularly in sectors like telecom and financial services – in the context of the Draghi Report?
MS: Clearly, we have a situation where Europe is, as highlighted by the Draghi Report, the Letta Report and many others, falling behind the US and China in terms of competitiveness. The productivity gap is also increasing.
I think it’s an interesting point to start with because I think Europe should also think about what it means to be competitive and what type of society we will need to develop. I don’t think just copying other regions like the US and China could necessarily fit Europe. Europe has a different history.
European countries base their competitiveness on a different social model.
So European countries should ask themselves, what does it mean to be Europe in this geopolitical situation? And it’s not just about competitiveness. I think there is also a bigger question in terms of values and what Europe stands for in a global context.
Obviously, competitiveness is one of the big topics, but it has several features that we see as important. For example, if you look at the number of IPOs in Europe versus the number in the US and in China, you can see that the amount of new publicly listed companies in Europe is declining.
On top of IPOs, the number of unicorns Europe has built has decreased over the last years. So, there are several contributing factors to consider.
JB: How important is the completion of the EU’s single market in financial services?
MS: There are some ‘hard’ factors here that depend on the resources available and on the type of society that we have. But there are also some other factors that we have created, including complex regulation that makes private funding, for example, difficult to deploy.
When we look at other continents, for instance, the US, there are pension funds and other financial instruments that are providing a significant boost to the private sector. Therefore, maybe we should think about how the European Union can make sure that such funding is available to companies, whether they are private or public.
Clearly, a more integrated European insurance market could help with this. The more the capital market in the European Union is liquid and bigger, the better. And there is still a lot to be done.
JB: What role does Solvency II play in enhancing the EU’s competitiveness, and what sort of outcome would benefit the insurance industry?
MS: Solvency II has been a very important regulation over the past year. If we look back at the history of the regulation, I think it benefited the sector by making all the different players more conscious.
Clearly, we are now at the end of the legislative process on Solvency II, and some measures are really important to be included to allow capital to be freed up to invest in the real economy. That, I think, is the main part.
Regarding the competitiveness of Europe, we need to understand that this kind of regulation can also help boost investment in the private sector. In particular, for insurers who have a significant investment capacity, we need to make sure that this capacity is deployed in the right way. By which, I mean not being pro-cyclical and not looking at the short term.
We can be patient and long-term investors supporting the development of companies. So, our mindset is different compared to, for example, banks.
Therefore, Solvency II is not just a regulation. It impacts our ability to make a difference in the social and economic structure of Europe. And it’s important that we keep on delivering on these changes as required. The more we unlock the capacity of financial institutions to participate in the real economy, the better.
JB: You mentioned that long-term investments contribute to overall competitiveness in the EU. What specific European innovations is Generali currently supporting or investing in? Can you give concrete examples of projects?
MS: I would start from the long term because, as I said, insurance can be a patient investor and provide long-term capital for a company. Making sure that we invest in the right way for the customer is the real end game for us – keeping in mind that Generali is an insurer but also a global asset manager. This means that we can also make direct investments in real assets, such as infrastructure.
The reality is we need to focus on how to make Europe more competitive and more sustainable going forward. Therefore, we have invested more than €20 billion in infrastructure projects or direct financing for businesses with both private debt and private equity – the kind of instruments that are important for the market.
This also includes more than €6 billion in EU projects. To give you an example, we have the Fenice 190 fund initiative, which is providing SME financing in Italy, France and Germany. More specifically, our investments include the construction of photovoltaic and wind power systems, installation of batteries, digitisation projects like data centres, and redesigning of historic buildings.
For example, we own one of the most iconic buildings in Italy, but also across Europe: the 500-year-old Procuratie Vecchie in Piazza San Marco in Venice. We are really proud of the work we have done there.
In addition, I could also mention our €16 billion investment in green, social and sustainable bonds. We have made many long-term investments that we believe are going to help the transition towards a more competitive but also more sustainable Europe.
JB: How is the insurance industry addressing the challenge of climate change? How is it preparing for future challenges, such as demographic shifts and technological disruptions in the EU?
MS: This is interesting because in this transition, we talk about the long term, but probably there is a short-term part as well. Look at startups, right? Or scale-ups. How can we make sure that SMEs grow? So, we have partnered with the key players in the market to support the development of companies in mobility, AI, cyber security, etc. But, going into your question on climate change and democracy or technological disruption, I think these are all important points.
We see in Europe a protection gap, where people and SMEs, in some cases, are not protected at all or not as much as they should be. Climate presents a big protection gap, and we see risks that are increasing on that front. There are estimates that this protection gap globally is close to USD 2 trillion!
With climate change, there is a big topic to be faced regarding insurance protection. But there is also an even bigger topic about what insurance can do for society in general.
We can talk to clients and help them understand the implications of climate change. We are all moving from mitigation to adaptation as, unfortunately, part of the climate change is already here.
So, we need to make people understand that we can reduce the impact of climate change by working on prevention and infrastructure, and this is really important. It also highlights the role of insurance: we’re not only providing coverage, but insurers also have a social role in terms of helping people understand the type of risk that they’re facing so that they can reduce it.
There is still a lot of work to be done on mitigation, reducing our carbon footprint, etc. I’m very passionate about the work that insurance can do to help people understand the types of changes that are happening at the moment. I could also mention cyber, where the perception of risk is seemingly much less at the moment than in climate, but I do believe that it’s still very high.
JB: What role do you see for the insurance industry in supporting the EU’s green and digital transition agenda?
MS: The role of insurance in supporting the necessary transitions is clear, but there are many dimensions of change. The green and digital transition is one aspect. However, it’s important that policymakers understand that the insurance industry can do more, and we are in the right position to do more.
I also believe that we should even accelerate the digital transition and the green transition. Innovation and digital investment are really important for the future of Europe. We talked already about the recent report of Mario Draghi and the required investments it highlights. But that plan is not the only plan that I’ve seen.
Whether these estimates are coming from a German think tank or some other organisation, the investment that we need is massive. Therefore, we must make sure that we can unlock what the private sector and insurance can give to this transition. As an estimate, the insurance industry, as a long-term investor, has around €10 trillion of assets under management.
Imagine how powerful this could be if we unlock it and put it to work for Europe.
[Edited By Brian Maguire | Euractiv’s Advocacy Lab
