As economies across the global face volatilities as a result of shocks in the political and financial environment, experts at Swiss Re say that public-private partnerships, in combination with the use and development of new technological capabilities can help to strengthen them.
In the Swiss Re’s latest sigma report, titled ‘Global Economic and Insurance Outlook 2020,’ the company claimed that major economies are now less well-equipped to rebound from unexpected shocks than they were before the 2008-09 global financial crisis.
The report urged policy makers to focus on increasing cooperation at the global level and encouraged a move towards more private and capital markets solutions to remedy the situation.
It added that private market solutions should also be looking to integrate new technologies and data analytics, as well as innovative new products such as parametric insurance, to improve insurance take-up.
Re/insurance is a central component of global economic resilience, Swiss Re said, and yet its latest estimates put the global protection gap for mortality and property risk at $500 billion, or roughly 70 percent of the size of the respective markets (or 0.6 percent of global GDP).
Public-private insurance partnerships are therefore to the benefit of both parties, as closing the protection gap represents a huge opportunity for re/insurers and will help support global economic resilience.
“Building risk awareness and encouraging consumers to take up insurance coverage is a key area of action in both the advanced and emerging markets,” the report stated. “Insurance is an automatic stabilizer to smooth financial volatility for households and businesses. In this function, it makes economies more resilient to shocks.”
Insights from behavioural economics will also help re/insurers to better understand consumer buying behaviour, Swiss Re suggested, while digital technologies will help streamline the sales process and reduce distribution and administrative costs.
In the long-term, developments in technology and data analytics will contribute to resilience by making cover more affordable and accessible to lower income groups, although it will also help to expand the boundaries of insurability and facilitate access to new risk pools, the report said.
