Speaking on a panel on day two of The Geneva Association’s 50th Summit in Zurich, Christian Mumenthaler, CEO of Swiss Re, said that amid the current geopolitical tensions, many investors are turning negative on risk-taking assets, preferring risk-free assets, which is contrary to what has occurred in the last decade.
Discussing what the insurance landscape will look like in 2050, Mumenthaler observed that the last 70 years were the “best of humankind by nearly any KPI.”
“After the great disaster of the Second World War, new institutions were created, and they helped us into the best phase of humankind. Unfortunately, over the last 15 years or so, the trust in this system has started to erode, and forces in many countries that are more fearful and who see enemies everywhere, have risen,” he said.
Mumenthaler highlighted that the world is currently “in a decline of trust” adding that it’s “clearly the stronger force right now, and it’s not getting better.”
He continued, “I’m fearful of what’s going to come at the end of this decline, and I think it will need a lot of strength from all the people who don’t want this decline to stop that trend and turn it around. We have ex-presidents of Russia speaking on Russian TV, talking about the first strike on London and Berlin, that’s how crazy the world we are in today is.
“While you might say this is just to create fear in the West; it is said, it’s spoken, and so it’s extremely worrying and clearly the world overall is reacting to that, and sort of withdrawing.”
Mumenthaler stated it is not the end of globalisation, but ” separation is being created everywhere.”
Commenting on what this geopolitical shift means for the re/insurance industry, Mumenthaler underlined the dangers of further conflicts, adding, “I think that’s probably a reason why many investors right now are very negative on any risk-taking assets and prefer the risk-free assets which is contrary to what we had the last 10 years. So, volatility overall in financial markets.”
He also observed some of the effects of inflation, saying, “I think if everything is rerouted, not with efficiency as the first priority, but safety, security, being with friends, if that’s the new criteria, then everything will be more expensive.
“On top of that, the whole transformation that we will need to have to get to net zero. So, the whole decarbonisation of the industry will add to costs. So, I think inflation is higher for longer, which has consequences for us.”
Mumenthaler concluded, “Finally, something which is maybe more for the reinsurers, is that the system we have, and the insurers are relying on that, is to take risk from everywhere and share it, diversify it, for the benefit of everyone.
“That’s the most effective system, but as we get into this more split world, you see more and more barriers being put up to this ideal risk transfer, and we see it everywhere.
“It’s also in the West that you see protectionist forces coming to the fore and that means this efficiency will go down and therefore prices will go up, and the efficiency of the system will be less. It will affect reinsurers and through that, it will affect the insurance companies.”
