The confidence to invest Reframing the value of insurance

Insurance rarely attracts attention for the value it creates. It enters the conversation when premiums rise, capacity tightens or claims are disputed. Those are legitimate debates, but they focus attention on cost and cover after uncertainty has materialized, rather than on the role insurance can play before boards commit capital to a major decision.

That means we are asking the wrong question. Instead of asking only what insurance costs, boards should ask what investments it can help make possible. Risk managers, in turn, should be equipped to show how risk insight, mitigation and risk transfer can support those decisions.

The hidden cost of uncertainty

As wildfires become a recurring threat across Southern Europe and an emerging one farther north, attention understandably focuses on their human and economic consequences. But the effects extend beyond the assets directly damaged. Greater exposure can make tomorrow's investment decisions harder: boards question whether to commit capital, lenders reassess financing terms, and critical projects may be postponed until the risk is better understood and managed.

Disruptive events can destroy existing assets; uncertainty about their likelihood and impact can delay the decisions needed to build new ones. That delay rarely appears as a loss on the balance sheet. Its impact can be seen in the factory, energy project or infrastructure investment that does not proceed this year, and in the growth, resilience and competitive advantage deferred with it.

The underlying exposure is already significant. The European Environment Agency estimates that weather- and climate-related extremes caused €738 billion in economic losses across the EU between 1980 and 2023. More than a fifth of those losses occurred in the final three years alone, and in most European countries more than half remain uninsured.

Capital doesn't always flee uncertainty. Sometimes it simply waits.

Addressing the confidence gap

Europe often talks about its protection gap: the difference between the losses that occur and those that are insured. It is a real and important issue. But beneath it, I see a second, quieter challenge: the confidence gap, the distance between an investment that appears strategically attractive and the level of confidence a board needs to commit capital. This matters all the more as Europe seeks to strengthen its capabilities in semiconductors, clean energy, digital infrastructure and defence. Each of these ambitions requires capital to move, but uncertainty can delay investment or direct it elsewhere.

Capital may be available, the technology proven and the project ready to proceed. What can still be missing is sufficient assurance that the assumptions behind the decision are sound: that physical and operational exposures are understood, financing will remain viable and disruption will not undermine the expected return. Without that assurance, investment may be delayed, reduced in scope or directed elsewhere; the result can be a higher cost of capital, narrower strategic options and weaker resilience, growth and European competitiveness.

Supporting capital decisions through risk management

This is why widening the lens should mean more than identifying more risks. It should mean understanding how uncertainty shapes capital allocation in the first place.

Boards do not encounter climate, geopolitical, technological, regulatory and supply-chain risks one at a time, neatly separated into committee agendas. They converge in a single question behind every major decision: is this still a sound strategic commitment? Treating them as isolated categories of risk was always a simplification. Today, that simplification can lead to poorer capital decisions.

This gives risk managers a broader strategic role. By bringing together risk insight, mitigation and risk transfer, they can help boards distinguish between the uncertainty a company can reduce, transfer or retain, and understand what that means for a major investment. Their contribution is not simply to protect the balance sheet after a decision has been made, but to help shape the conditions on which capital can be committed with confidence.

Translating risk into decision-ready terms

We often say insurers price risk. Our role is to understand specific exposures and translate their potential financial consequences into terms that boards, lenders and investors can use in making decisions. Insurance does not remove uncertainty. But effective risk insight, mitigation and risk transfer can make the potential consequences clearer, easier to evaluate and more manageable.

Financing markets are already reflecting these differences in risk. In the European Central Bank's bank lending survey, banks reported more favorable credit standards for companies with stronger climate performance and tighter terms for high-emitting companies making little or no progress on transition. The findings suggest that how a company manages climate-related risks may increasingly influence its financing conditions.

The same principle applies beyond climate. A manufacturer considering a more connected, automated production line must weigh the productivity gains against greater exposure to cyber disruption. Early risk insight, mitigation and risk transfer can give the board and its financing partners greater assurance that the investment can proceed on resilient terms.

Whether an offshore wind farm secures financing, a semiconductor plant receives approval or a data center proceeds, insurance is rarely the headline; it can, however, be one of the factors that gives decision-makers sufficient assurance to move forward.

That does not diminish the case for insurance. It defines its value more precisely.

Investing despite uncertainty

Europe will not become more competitive because uncertainty disappears. It will become more competitive by investing despite it. The sectors that will shape Europe’s future competitiveness all require long-term capital commitments in the face of genuine uncertainty. How effectively Europe manages that uncertainty will help determine whether it builds those capabilities at home or cedes ground to others.

That requires technology, leadership, better data and better risk management. Above all, it requires earlier collaboration. Boards should involve risk leaders while major investments are still being shaped. Risk managers should frame their contribution not only in terms of protection, but also in terms of capital, opportunity and strategic choice. Insurers, too, should engage before projects are fully designed and brought to market, when risk insight, mitigation and risk transfer can have the greatest influence on whether they proceed.

The opportunity is not simply to insure tomorrow's investments, but to contribute to the conditions in which those investments can proceed. We often ask what insurance costs. It is time we also asked what becomes possible because it exists.