The reinsurance market has established itself as a capable private partner for the public sector in recent years. Putting the capital and capabilities of the reinsurance sector to work to create new coverages and meet evolving demands from public sector entities is a crucial component for reducing disaster suffering. At a time when governments worldwide are forced to bear a growing share of losses and face multiple challenges in funding increasing costs associated with aging populations, higher debt, labor force limitations, supply chain interruptions and economic losses resulting from business closures, countries can make important progress in quantifying and mitigating risks by working closely with reinsurance carriers and intermediaries.
Transformational Investment: Converting Global Systemic Risks into Sustainable Returns, published by the World Economic Forum in collaboration with Mercer, addresses some of the long-term, global systemic risks facing economies, societies and the planet – and the need to do so has arguably never been stronger. The institutional investment community has the collective power to champion long-term thinking, to constructively tackle complicated problems, and to bring positive change – all while pursuing attractive risk-adjusted investment returns. Mercer is an affiliate of Guy Carpenter.
This report represents an important step on the journey to effective collective action by the institutional asset owner community and the financial services industry. The evolving set of long-term risks and challenges – accompanied by opportunities for transformational investment – are not easily captured within conventional investment and risk management frameworks. These risks share characteristics including:
- A long time horizon with widespread, sometimes global, impacts.
- A lack of accepted standards for measurement.
- The potential for adverse impacts on the ability of long-term investors to achieve their objectives.
- The potential for adverse impacts on the economic stability of the funding entity.