In October 2015, the government announced the creation of a National Infrastructure Commission (NIC), with a remit to provide an integrated assessment of the countrys infrastructure needs for each parliament, in the context of a much longer-term (up to 30-year) outlook.
In October 2015, the government announced the creation of a National Infrastructure Commission (NIC), with a remit to provide an integrated assessment of the country's infrastructure needs for each parliament, in the context of a much longer-term (up to 30-year) outlook.
The commission will aim to build political consensus on the country's long-term infrastructure needs and provide greater certainty for investors.
It is headed by chief executive Phil Graham, formerly secretary to the Airports Commission at the UK Department for Transport, and chaired by former Labour transport secretary Lord Adonis. The commissioners include former deputy prime minister Lord Heseltine and Sir John Armitt, who chaired the Olympic Delivery Authority.
The IFoA welcomes the new energy and commitment from government that the creation of the NIC signals. Although infrastructure projects help to generate economic growth, tough economic conditions in recent years have reduced the available capital, as well as the electorate's appetite for higher taxes or user fees. We hope that the NIC will be a catalyst for an increase in the number and credibility of public-private projects.
The European regulatory environment seems to be moving in the same direction: for example, the European Insurance and Occupational Pensions Authority (EIOPA) has reduced risk charges for qualifying infrastructure investments.
The IFoA is actively involved in the infrastructure debate.
We have already begun to engage with the NIC to promote the distinctive contribution we can make as actuaries in this area. The Risk and Returns in Infrastructure Working Party produced a paper in 2015, providing evidence that well-chosen infrastructure can support sustainable and socially responsible investment that also provides long-term, inflation-linked cashflows for pension funds and insurers. The group's chairman, Chris Lewin, made a well-received speech at a major infrastructure event at thinktank Chatham House last autumn.
So what is our distinctive contribution? Actuaries understand how to implement a risk management approach to infrastructure investment, including scenario analysis of possible financial outcomes that can give potential investors an exhaustive and balanced view of the risks they might face.
The approach known as risk analysis and management for projects (RAMP), for example, has been used in the UK's largest engineering project, Crossrail 2. At the same time, actuaries are also involved in advising long-term institutional investors, so we can offer depth of insight into the perspectives of both project sponsors and investors.
Working with the Risk Board, the IFoA's policy and public affairs team is developing a policy briefing aimed at parliamentarians, officials and regulators, which will flesh out the IFoA's position on infrastructure investment and the scope for actuaries in this area. It will also include three detailed case studies - on renewable energy, transport and housing - where we can highlight examples of actuaries' innovative thinking on financing models.