Long-term infrastructure insurance bonds pave the way for sustainable growth

Prof Omar Faruque: Long-term infrastructure insurance bonds can play a critical role in accelerating and sustaining Bangladesh’s key infrastructural development. As the country moves toward becoming a middle-income economy, large public investment is required in areas such as energy, transport networks, ports, telecommunications, water management, housing and climate-resilient infrastructure. Traditional financing models heavily depend on public funds and external loans, which create debt pressure and vulnerability to global economic conditions. Insurance-backed long-term bonds offer an alternative and more sustainable pathway.

Insurance companies collect premiums that often remain unclaimed for years because risks materialise over long durations (example: life, pension and health insurance). These funds are ideal for long-term investment because they match the tenure of infrastructure projects, typically 10 to 30 years. By purchasing infrastructure bonds, the insurance sector channels idle capital into productive national assets. This supports fiscal stability because the government or project authorities access necessary funds without relying excessively on foreign borrowing. As a result, foreign exchange pressure decreases and Bangladesh’s economic sovereignty strengthens.

One major advantage of insurance involvement is risk management. Infrastructure development faces risks such as cost overruns, construction delays, environmental hazards and political changes. If insurance companies underwrite these risks, they help ensure the viability of projects. Investors gain confidence knowing insurance guarantees are in place, making bonds more attractive to both domestic and global institutions. This extended confidence ultimately lowers the cost of capital for the government.

For Bangladesh, infrastructure investment also has a multiplier effect. Roads, bridges, airports and energy projects stimulate trade, create jobs and expand regional connectivity. When insurance funds power these developments, growth becomes self-generating. Additionally, by issuing bonds specifically linked to climate-resilient infrastructure such as coastal embankments, water treatment facilities and renewable energy grids, Bangladesh can mitigate its disaster vulnerabilities. Insurance bonds reduce recovery costs after cyclones and floods because the risks are pre-managed through financial protection.

Introducing infrastructure insurance bonds also enhances capital market depth. Currently, Bangladesh’s bond market is underdeveloped and dominated by short-term government securities. Long-term bonds backed by guaranteed insurance cash flows help diversify the investor base and provide stable financial instruments for pension funds, banks and retail customers. Corporate governance improves because bond issuers must maintain stricter financial transparency and accountability.

Furthermore, infrastructure insurance bonds make financial inclusion opportunities. Citizens who hold insurance policies can indirectly become contributors to national development. Their premiums work as collective investment in essential projects, strengthening the link between public participation and infrastructure growth. Over time, public trust in both insurance providers and capital markets increases.

To make this model fully operational, Bangladesh must establish strong regulatory frameworks, ensure transparent claims and fund management and align policy-makers, insurance companies and project developers under a common roadmap. If executed well, long-term infrastructure insurance bond strategies can unlock billions of dollars in domestic capital. This transforms infrastructure financing from a burden into a sustainable engine of development, enabling Bangladesh to achieve long-term economic competitiveness, resilience and prosperity.

(Writer: Omar Faruque, Professor, Department of Finance, Jagannath University)