Swiss Re Institute has released its fifth resilience sigma report titled Restoring Resilience: The Need to Reload Shock-Absorbing Capacity.
The report highlights the escalating global protection gaps in natural catastrophes, crop, mortality, and health insurance, which now demand a staggering $1.8 trillion in annual insurance premiums—a record high. Over the past five years, these protection gaps have surged by 20%, propelled by growing economic demands and the impact of inflation.
Despite the alarming rise in the protection gap, the report showed a positive development in society's ability to withstand unexpected financial shocks, Swiss Re said. Currently, 57% of global risks associated with natural catastrophes, crop, mortality, and health are covered by insurance—a three-percentage-point increase since 2012.
This year's report introduces a novel indicator of resilience focused on food security. It examines the extent of underinsurance in global crop production, revealing that 60% of the world's crop production remains uninsured, with the most significant protection gap observed in emerging Asia. Closing this gap would necessitate $113 billion in annual insurance premiums for crop coverage.
“We’ve been seeing tectonic shifts in economic policies across the globe as governments have responded to war, a pandemic, and rising inflation,” said Jerome Haegeli, group chief economist at Swiss Re. “Despite the uncertainty and volatility, the world is more resilient today, and insurance is playing a stronger role than it did a decade ago. However, resilience remains 15% weaker than before the Global Financial Crisis, and the risk is elevated. The inflation-taming monetary tightening process has laid bare financial stability and recession risks, while persistent inflation increases households’ need for more fiscal support to offset their erosion of purchasing power. We expect little improvement in macroeconomic resilience in 2023.”
To enhance resilience, Haegeli emphasized the importance of investing in adaptation and mitigation measures to minimize losses. He underscored the need for increased investment in this area, suggesting the development of resilience bonds as a means to attract new sources of capital while delivering economic benefits.
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Alongside the focus on crop resilience, the report provided updates on overall global economic resilience, health insurance, mortality, and natural catastrophe lines for 2022.
Key findings from the report include:
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