Innovation investment fuelling inclusive, green growth in Europe’s forgotten regions
Several months after the French Government’s late-February announcement of a €100 billion rail investment plan, the chief of the state-run rail company, the SNCF, called for motorway and airport tax hikes to fund this ambitious initiative.
Through the envisioned network expansions and renovations, France aims to accelerate its green transition while closing the infrastructure gaps separating Paris and regions that have long felt forgotten. Unlike the capital region, metro areas across France lack rapid, sprawling suburban rail systems, with weak transport links cutting people off from job and educational opportunities. The planned improvements will thus play a crucial role in ‘levelling up’ regions whose economies and public services lag well behind Paris – but physical infrastructure will not suffice.
This rail revolution will need to be paired with strong place-based innovation investment to fuel territorially-inclusive and sustainable development. The private sector will clearly be essential in this endeavour – in France as well as in Europe – with mutual insurers’ people-focused model, penchant for innovation and long-term outlook positioning them at the vanguard.
European regional gaps widening
France’s regional inequality issues largely mirror those of Europe, whose post-industrial and rural areas have been left behind by the economic shifts of recent decades.
While economic disparities between EU member states have been declining, internal gaps are widening. According to a 2015 European Commission study, inequality had been increasing within many EU countries in the previous thirty years, with the 2008 financial crisis significantly compounding issues from high unemployment and skill shortages to poor infrastructure and access to education and health.
More recently, the economic fallout of the COVID-19 pandemic and war in Ukraine paired with a deteriorating climate situation and accelerating digital and green transitions have created a significant risk storm for Europe’s regions, with the IMF concluding that teleworking and labour automation trends could exacerbate employment gaps between the continent’s urban centres and economic ‘peripheries.’
And beyond domestic challenges, the ‘places left behind’ now have to contend with the massive green industrial subsidies and tax incentives of the US Inflation Reduction Act (IRA), with recent proclamations from major European firms including Volkswagen and Northvolt already signalling a worrying transatlantic investment shift.
Insurance sector’s unsung innovation role
Facing a range of economic, energy and environmental threats, European innovation investment will need to be significantly ramped up to ensure its beleaguered industries and regions seize the opportunities presented by advanced technologies and renewable energy.
Despite strong rhetoric in Brussels, Paris and Berlin on public industrial subsidies, the EU is yet to find a way to ensure relaxed state aid rules avoid hurting its poorer member-states, with a proposed ‘European Sovereignty Fund’ hampered by members weary to assume further collective debt. The private sector will therefore need to step up in a big way to fuel innovation-driven inclusive growth.
Although not usually associated with innovation, McKinsey has highlighted the insurance sector’s “long track record of creating new and exciting markets around emerging risks and consumer demands.” Crucially, the industry is harnessing the massive potential of InsurTech to continuously improve its approaches to service provision and risk mitigation in a rapidly-evolving landscape, with the automation of data collection and analysis creating leeway for insurers to focus more on people at a time when climate change is fuelling increasingly frequent and damaging natural disasters.
European mutuals paving the way
French mutual group Covéa is among the leading insurers mobilising innovation to deliver social impact, emphasising its responsibility to invent new solutions and fulfil the insurance sector’s role as a “brick contributing to a healthier economy,” as Secretary General and Deputy CEO Sylvestre Frezal has written.
Capitalising on its strong local presence across France, Covéa uses its innovation investments to promote regional development. Through MMA – one of its three mutual insurance subsidiaries, along with MAAF and GMF – Covéa actively participates in the ‘La Foundation d’entreprise MMA des Entrepreneurs du Future’ initiative, which supports entrepreneurs in developing innovative solutions to today’s and tomorrow’s challenges. Recognising the economic role that these up-and-comers play in their respective regions, this project crucially facilitates cooperation between entrepreneurs to accelerate territorial development and high-value job creation.
Gothaer, one of Germany’s largest mutual insurers, has adopted a similarly forward-thinking approach in developing novel green insurance products. Going beyond a view of climate change as simply a damage risk to be mitigated, CEO Oliver Schoeller says that Gothaer “actively supports our customers in the transformation towards a sustainable economy,” notably by offering significant auto rate discounts for electric vehicles (EVs) as well as tailored coverage for renewable energies projects and solar panel installations.
Furthermore, with its $100 million commitment to the HSBC-backed Climate Asset Management fund, Gothaer is funding sustainable agriculture and forestry projects across Europe and Oceania.
Mutual model making continental, global impact
Insurers like Covéa and Gothaer are showing the value of the mutual model, whose commitment to its community of member-customer ‘insureds’ – as opposed to shareholders and short-term profits – ideally positions its firms to progress innovation and sustainability.
Encouragingly, the European mutual market is on the rise, reaching a record market share of 33.4% in 2020 according to AMICE and ICMIF – the European and international mutual industry associations, respectively – with AMICE President Grzegorz Buczkowski highlighting how “consumers appreciate the focus on values such as sustainability, service…and support to society.” Crucially, AMICE is helping embed the mutual model in Europe, notably via engagement with the European Commission, which has formally identified the sector as a key social economy player.
On the global front, ICMIF has partnered with the United Nations Development Programme (UNDP) to launch the Insurance Innovation Challenge Fund. The Fund will help bolster the financial resilience and protection of vulnerable households in developing countries by providing mutual insurers with technical and financial support in developing innovative, affordable solutions at a time of growing poverty.
With concurrent crises bringing new challenges and opportunities, regions – both in Europe and in the Global South – cannot be left behind. Mutual insurers are capitalising on natural strengths to fuel inclusive, green development, helping to ensure the benefits of innovation are felt by all of society. Moving forward, private sector innovation must complement infrastructure investments, like France’s planned rail overhaul, in accelerating the socioeconomic growth of ‘forgotten’ areas the world over.