Insurers struggle to manage risk of infrastructure U-turns
As life insurers increase their holdings of infrastructure assets, their exposure to political risk grows. There is no perfect hedge, but firms can understand political risk better and guard against it more effectively.
Infrastructure projects usually require a green light from governments, but as administrations and their policies come and go, that light can quickly turn from green to red.
Europe's prolonged low interest rate environment is pushing firms into infrastructure investments as they seek the illiquidity premium available for assets that would be difficult to sell quickly. But illiquidity also makes investors vulnerable to governments reneging on, or interfering with, infrastructure contracts, not
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