SCOR’s Chief Executive Officer (CEO) Denis Kessler has said that the failings of public risk management are “plain to see” in the aftermath of the COVID-19 pandemic.
Kessler addressed the “havoc” that the pandemic has wreaked on the global economy, in addition to the severe public health threat that it represents.
But notably, he says that the “vast majority” of global economic contraction and swelling phenomena can be traced back to decisions by authorities.
All the measures they have taken to address the pandemic – in particular lockdowns, curfews and travel restrictions – have had recessionary effects on economic activity.
However, conventional treatments for economic recessions have proved ineffective in lessening the economic blow so far, due to the exogenous nature of the crisis, which lies outside the financial system.
“And this shock was not anticipated by businesses or governments,” Kessler explained. “Decisions-makers in every area have simply been making things up as they go along.”
“A pandemic was a major risk factor that had been ignored, downplayed and dismissed. The failings of public risk management are plain for all to see. The lack of preparedness has driven up the cost of the pandemic in the strict sense of the term.”
The ability of both global and local economies to bounce back from the recent disruption will depend on a number of variables, including the elasticity versus rigidity of each system, and potential mismatches between consumer demand and supply.
For some areas, such as the equity markets, recovery is already evident, although other issues such as public debt and liquidity surpluses created by central banks could take much longer to address, Kessler warns.
“Things won’t get back to normal any time soon,” he concluded. “We will all have to help foot the very steep bill for the pandemic, which amounts to around 10% of national income. We are still looking for answers to many questions: will we have to start paying straight away, further ahead… or never?”
“Will we foot the bill through heavier payroll charges, through erosion in the value of bond savings and/or a reduction in our purchasing power driven by inflation? Will the whole population, savers, taxpayers, the wealthiest or all taxpayers be left to carry the can?”