The COVID-19 crisis reduced overall macroeconomic resilience – or the ability of societies to absorb shocks – by 18% in 2020 compared to 2019, according to a sigma report published by the Swiss Re Institute. At the same time, the report says, the global insurance protection gap has reached an all-time high of $1.4 trillion.
Weakening macroeconomic resilience last year was driven by fiscal stimulus in advanced markets to cushion the economic blow of the pandemic, according to the report titled “Resilience Index 2021: A Cyclical Growth Pickup, but a less resilient global economy”.
“The stimulus has more than halved the fiscal reserve capacity of advanced economies, leading to a decline of more than 20% in the overall macroeconomic resilience of these economies in 2020,” the report continues. Swiss Re’s Macroeconomic Resilience Index analyzes 10 indicators, including fiscal and monetary policies, insurance penetration, labor market efficiency, economic complexity and income inequality
Source: Swiss Re
While the report predicts that global macroeconomic resilience will strengthen in 2021, driven by a strong economic recovery, Swiss Re does not expect a full return to pre-pandemic levels in 2021. “Even with strengthening this year compared to 2020 lows, global macroeconomic resilience is even weaker than it was in 2007 before the global financial crisis.
This weakness will make the recovery in economic growth vulnerable to setbacks, the report confirms.
Out of 31 countries analyzed by Swiss Re’s macroeconomic resilience index, the United States is ranked 10and most resilient country, with Canada ranked 7th, New Zealand 8th, Australia 9th, Germany 11th, UK 16th and France 18th. Other notable rankings are China at 19th and India at 19th. 24. See accompanying table.
At the top of the resilience index are Switzerland (1), Norway (2), Denmark (3), Finland (4), the Netherlands (5) and Sweden (6). At the bottom are Greece (31), Turkey (30), Brazil (29), South Africa (28), Mexico (27) and Russia (26).
“Our research clearly shows that economic resilience pays off. Advanced regions have benefited from both higher levels of macroeconomic resilience and health insurance resilience than their emerging counterparts,” commented Jerome Haegeli, chief economist at Swiss Re, in a statement.
“However, to restore macroeconomic resilience and boost long-term growth, deep structural reforms are needed,” he added.
“The global pandemic has widened the gap between rich and poor. She laid bare the need for governments to focus on rebuilding and promoting social cohesion. Social equity – and at its core, creating equal opportunities for all – will be a defining feature of a more resilient world,” said Haegeli.
Insurance resilience
Addressing global insurance resilience, the report notes that the global economic recovery and growing risk awareness due to the COVID-19 crisis are expected to bring a strengthening of global insurance resilience in 2021 as demand for insurance is increasing, according to a report published by Swiss Re’s sigma.
Due to the pandemic crisis, the combined global insurance protection gap for health, mortality and natural disaster risks increased by 6.3% to $1.4 trillion in 2020, according to the report. (Editor’s note: The insurance protection gap is the difference between the economic losses from an event and the losses covered by insurance. A larger protection gap indicates lower insurance resilience).
Closing the insurance protection gap “would both support long-term economic stability and increase society’s ability to absorb shocks. Making insurance more widely available and affordable will be essential. But re/insurers and corporate and government leaders must make resilience a common priority,” Haegeli said.
Of the three risks – health, mortality and natural disasters – resilience against nat cats remains the lowest with a protection gap of more than $230 billion in 2020, the report says, noting that 76% of global disaster exposures natural areas have remained unprotected.
Global resilience to natural disasters has not improved over the past 10 years, which Swiss Re attributes to lower insurance penetration in high-growth emerging economies, as well as lower underwriting rates. higher in slow-growing advanced markets.
“Essentially, 4 billion people around the world are severely underprotected against the risks of natural disasters,” the report continues.
“By country, people in Denmark, France, New Zealand, Australia and the UK are the most protected,” Sigma said, referring to resilience to natural disasters.
“The Emerging Asia-Pacific Index score is the lowest at 3.6%, meaning that more than 96% of potential losses from natural disasters in the region are unprotected.”
Of the 33 countries ranked by Swiss Re’s Natural Disaster Resilience Index, the United States is 12and on the list, Germany is ranked 13th and Canada 20th.
Topics
COVID-19 Swiss Re
