The world economy regained macroeconomic resilience in 2021, but ongoing impacts make the recovery fragile, according to a new report from Swiss Re Institute.
In 2021, the global economy saw a cyclical rebound from the COVID-19 pandemic, resulting in greater capacity to respond and quickly recover from a crisis, the report found. However, the full impact of slowing growth, high inflation and global geopolitical tensions this year may throw a spanner into the resilience recovery.
Global insurance resilience also improved last year thanks to strong insurance growth driven by rising risk awareness among customers and pandemic-related health spending by governments. However, insurance resilience has not yet recovered to pre-pandemic or pre-Global Financial Crisis levels.
The world insurance protection gap for health, mortality and natural catastrophe risks combined hit a new high of US$1.42 trillion in 2021, and the current inflationary environment is expected to widen that gap even further this year, Swiss Re Institute reported. Despite a strong forecast for nominal insurance premium growth, insurance resilience is expected to weaken this year due to scaled-back government benefits and declining asset values.
“The cyclical recovery in both macroeconomic and insurance resilience in 2021 cannot hide the fact that deep structural reforms are needed to drive long-term growth,” said Jérôme Haegeli, group chief economist for Swiss Re. “The current inflation shock and cost-of-living crisis are disproportionately affecting the lowest-income households and will only widen protection gaps this year.
“To secure greater resilience and support long-term economic stability, structural parameters such as infrastructure and human capital need to be strengthened and inequality reduced. Against this challenging backdrop, the insurance industry plays an important role in shifting financial risks away from individuals and ultimately increasing their resilience.”