Climate-resilient infrastructure assets are well suited to life insurers that need reliable returns over long-term investment horizons. This is even more compelling in a low-for-long interest rate world. However, as the IDF has flagged at present only 2.5% of insurance assets managed are allocated to infrastructure17. So the world needs much more investment in infrastructure, and greater risk sharing of climate risks. Insurers have a unique ability to meet both needs. 15  See https://oasislmf.org/. Global Commission on the Economy and Climate (2016), The Sustainable Infrastructure Imperative. See: https://newclimateeconomy.report/2016/. 17 World Bank (2017), Risk and Capital Requirements for Infrastructure Investment in Emerging Market and Developing Economies. Available at: https://www.worldbank.org/en/news/feature/2017/12/22/risk-and-capital-requirements-for-infrastructure-investment-in-emerging-market-anddeveloping-economies. 16  6  All speeches are available online at www.bankofengland.co.uk/news/speeches  6  In this context, the impact of regulation on the provision and cost of infrastructure finance must be carefully considered. As World Bank studies have shown, there is evidence that infrastructure debt can be lower risk as it has more predictable and stable long-term cash flows and has low correlation to other assets. The historical default experience of infrastructure debt suggests a ‘hump-shaped’ credit risk profile, which converges to investment grade quality within a few years after financing has closed. However, such robustness is not reflected in the standardised approaches for credit risk in most regulatory frameworks. The World Bank study suggests that capital charges could decline significantly for a differentiated regulatory treatment of infrastructure debt as a separate asset class.

20 countries, which account for 17% of global GDP, have already committed to or legislated for a net-zero emissions goal, with the UK becoming the first in the G7 to do so. 4  All speeches are available online at www.bankofengland.co.uk/news/speeches  4  Insurance, Risk Financing and Development event, 22 September 2019 I would like to speak briefly about the role of insurance in smoothing the transition to a 1.5 degree world. This sector brings three things: expertise, money and perspective and those are all crucial in helping society adjust to the reality of that transition. My message is, whether it’s reducing the protection gap, financing resilient infrastructure or improving reporting, risk management and return optimisation across the financial sector, your contributions could be decisive. The insurance industry has a unique contribution of large capital (over $ trillion), deep risk management expertise and long-term perspective. Insurers are well aware that the physical risks of climate change are being felt across the globe with a plague of extreme weather events. The human costs are immeasurable. The financial losses however can be measured and they are significant. Insured losses in 2018 were $ billion, double the inflation-adjusted average for the past 30 years.10 But protection gaps in low and middle income countries mean that even greater costs are being borne by the uninsured.