US-based bond insurer enters Australian market
US-based bond insurer enters Australian market | Insurance Business Australia
Insurance News
US-based bond insurer enters Australian market
This is the first time the company has ventured outside of its home market
Insurance News
By
Roxanne Libatique
US-based bond insurer BAM Mutual has announced its expansion into Australia, offering bond insurance to support the financing of key infrastructure projects in the region.
This marks the first time the insurer has ventured outside of its home market, as it seeks to assist with Australia and New Zealand’s large-scale infrastructure investments.
The company, known for helping reduce borrowing costs for infrastructure development, will provide insurance for bonds and loans funding a range of projects, including energy transmission, transportation, and social infrastructure. These projects are critical to the region’s efforts to enhance its energy transition and support sustainable growth.
“We are looking forward to doing that for project sponsors and the users of projects across Australia and New Zealand,” he said, as reported by IT Brief.
He also emphasised that bond insurance can improve the economics of infrastructure by lowering borrowing costs, broadening access to capital, and enhancing market liquidity.
BAM Mutual’s Melbourne-based team will work alongside its US counterparts, who bring experience from previous engagements in Australian markets. The insurer, rated AA by S&P Global Ratings, has insured over US$150 billion in bonds since its inception in 2012.
The company’s bond insurance model is designed to provide stability by reducing investor risks, ensuring that financing is secure over the long term.
Rising global construction insurance capacity
This expansion coincides with rising global construction insurance capacity.
According to WTW’s Global Construction Rate Trend Report, the construction insurance market is regaining capacity, approaching levels last seen in 2019. This growth is anticipated to continue through 2025 as insurers respond to growing demand for coverage, particularly in infrastructure-related projects.
New market entrants and a focus on maximising local capacity have contributed to this increase, positioning the sector to support upcoming projects in regions like Australia and New Zealand.
Importance of bond insurance for infrastructure projects
Andrew Bevan, who will lead BAM Mutual’s Australian operations, highlighted the importance of bond insurance for large infrastructure projects.
“The region’s infrastructure needs more than AU$200 billion of investment over the next five years to support sustainable development and a strong economy,” he said, as reported by IT Brief.
With 25 years of experience in capital markets, Bevan has worked on financing over AU$10 billion in infrastructure, including projects such as the Melbourne Convention Centre and Brisbane Airport.
Infrastructure investment in Australia
The expansion of BAM Mutual’s services in Australia comes at a time when both bond insurance and construction insurance are becoming increasingly vital to infrastructure investment.
WTW’s report pointed to projected sector growth of 7.8% in energy and utilities in 2024, reflecting the heightened need for investment in these areas. The construction insurance market, buoyed by increased capacity, is also poised to help manage the risks associated with these major projects.
Technological advancements are further driving changes in construction insurance, with innovations such as AI and robotics enhancing productivity in the industry. These technologies, combined with increasing capacity in the insurance market, are expected to help mitigate challenges such as labour shortages and complex risks.
As BAM Mutual begins operations in Australia and New Zealand, its bond insurance products are expected to play a crucial role in securing financing for essential infrastructure.
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