The COVID-19 pandemic has impacted many industries and economies worldwide – but can we recover from those impacts? The Swiss Re Institute (Swiss Re) delved into the landscape in its latest report.
Swiss Re’s latest Resilience Index revealed that the COVID-19 pandemic cut global economic resilience by nearly a fifth in 2020, and the global insurance protection gap reached a new high of around US$1.4 trillion last year.
It reported that the macroeconomic resilience index dropped from 0.54 in 2019 to 0.44 in 2020, with dramatic levels of fiscal stimulus in advanced markets cushioning the economic blow of the pandemic.
Government debt levels in advanced economies skyrocketed by over 16%, the most significant annual increase since the turn of the century. The increase in government debt was accommodated by loose monetary policy, which kept a lid on debt servicing costs.
On the bright side, Swiss Re expects global economic growth to recover this year after the pandemic-induced recession, helping to build macroeconomic resilience again. However, it clarified that resilience in 2021 would most likely not return to pre-COVID-19 levels.
Swiss Re Group chief economist Jérôme Haegeli said the study proved that economic resilience pays off, with advanced regions benefiting from more significant levels of macroeconomic resilience and health insurance resilience than their emerging counterparts.
However, Haegeli emphasised the need for deep structural reforms to drive long-term growth.
“The global pandemic has accentuated the gap between the rich and poor. It has laid bare the need for governments to focus on rebuilding and promoting social cohesion. Social equity – and at its heart, creating equal opportunities for all – will be a defining feature of a more resilient world,” Haegeli said.
All hope is also not lost for the insurance industry as Swiss Re expects global insurance resilience to grow in 2021 due to increased risk awareness.
For many, the pandemic has highlighted the importance of risk protection cover, the report said.
Haegeli commented: “The global insurance protection gap reached a new high of US$1.4 trillion. Closing this gap would both support long-term economic stability and increase society’s capacity to absorb shocks. Making insurance more widely available and affordable will be essential. But re/insurers and leaders in business and government must make resilience a shared priority.”