Resilience gains fragile as protection gap widens: Swiss Re

An improvement in economic and insurance resilience could be thrown off course this year by economic challenges and geopolitical tensions, while the global protection gap is widening, Swiss Re says.

The Swiss Re Institute Macroeconomic Resilience Index rose 12% last year following the pandemic shock, while the Global Composite Insurance Resilience Index increased slightly to 54.3% from 54.2%, still below levels before both covid and the global financial crisis.

Macroeconomic resilience is forecast to strengthen again this year, but remains fragile given inflation and economic risks, Swiss Re says, while insurance resilience is expected to weaken as scaled-back government benefits and declining asset values offset premium growth tailwinds.

Group Chief Economist Jerome Haegeli says a cyclical recovery in macroeconomic and insurance resilience can’t hide the fact that deep structural reforms are needed.

“The current inflation shock and cost of living crisis are disproportionately affecting the lowest-income households and will only widen protection gaps this year,” he said.

“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.”

The world protection gap for combined health, mortality and natural catastrophe risks reached a new high of $US1.42 trillion ($2.08 trillion) last year, up from $US1.38 trillion ($2.02 trillion).

Swiss Re anticipates the gap will widen further in 2022 and 2023 due to macroeconomic and climate related challenges, including the impact of high inflation this year.

Australia ranks eighth in the macroeconomic resilience index and New Zealand 10th. The top 10 also comprises Switzerland, Finland, Norway, Netherlands, Denmark, Sweden, Canada and South Korea.

The insurance resilience index shows Denmark, France, New Zealand, Australia and the UK are most protected against natural catastrophe risks, while emerging markets are the most exposed.