The macro trends supporting the industry are ‘very strong’, according to Swiss Re chairman of the board Sergio Ermotti.
In an interview given to Finance + Swiss, Ermotti said that despite the challenges of recent years, the potential for stable, continual global GDP growth means that the industry should be looking to a buoyant future.
Ermotti said: “The world has become even riskier than we thought only a few years ago and in that sense I do see the need for many people to take on insurance. People are more risk-aware at an individual level but also companies.”
He added: “And as we see in the next 10, 20 years GDP will continue to grow. We are quite positive that once we get out of this phase, GDP will continue to grow at 4–5% a year. Therefore, you will see the insurance sector benefiting from that. In addition, the fact that we are able more and more to use data and to analyse risks, to be much more focused on the way we take risk and we price risk will allow us to enter into new frontiers in respect of how we manage our business. Digital is also helping. A lot of people who have no access to insurance—people that typically are coming out of poverty going into the so-called middle class—they have some things to lose, and they are more likely to take on insurance.”
This does, said Ermotti, mean that the industry is without current challenges. He said that the world is still dealing with the aftermath of the coronavirus pandemic, with its second-order effects still to be fully understood. He also cited inflation as a ‘big issue’, along with the crisis arising from Russia’s invasion of Ukraine.
He added: “If the economy is not growing, [fewer] people probably will need insurance coverage and in turn, insurers will probably need less reinsurance services. So in a nutshell, you can see they are all related to what we see in the news every day.”
Ermotti also talked about the strengths of Switzerland as a base for reinsurers, saying that the nation with a population of 8.6m people was the third-largest player after the US (330m people) and Germany (83.2m).
He said: “Typically, we enjoy all the benefits of Switzerland: a stable political system, a very good infrastructure, very strong and credible regulation. In addition to that, we have a very liberal labour market that allows us to attract and retain talent, experts that are very key in our industry. And I would say we have excellent universities. We have access to new talent, in particular in the areas of IT, digitalization, engineering, mathematics, and actuarial works. So I think it’s a very good place. Last but not least, we are also in the centre of Europe with very good infrastructure: It’s very easy to come to Switzerland and to fly out of Switzerland in a convenient way. So it’s a reflection of the rest of the country’s strengths.”
