Reinsurance News

Opportunity to close $1.2 trillion composite protection gap, says Swiss Re

7th September 2019 - Author: Luke Gallin

Reinsurance giant Swiss Re has said that the world economy is less resilient now than in 2007 and has highlighted a $1.2 trillion composite protection gap for three main risk areas – nat cats, mortality and healthcare spending.

swiss reSwiss Re’s latest sigma report, which was announced today at the annual meeting of the reinsurance industry in Monte Carlo, says that, new Macroeconomic Resilience Indices jointly developed by Swiss Re Institute and the London School of Economics, the world is economy is less resilient now than at the onset of the global financial crisis.

At the same time, the report claims that separate insurance resilience indices show that the resilience of households against natural catastrophe risks, mortality and healthcare spending, has actually improved in most regions since the turn of century.

Swiss Re notes that insurers could boost global financial resilience by closing a record-high $1.2 trillion composite protection gap for the three areas of risk noted above.

Jerome Jean Haegeli, Swiss Re’s Chief Economist, said: “It is a trillion-dollar opportunity for the insurance industry. The insurance industry has largely kept pace with growing loss potentials and can do more to improve resilience. Emerging markets, in particular, benefit more strongly from insurance protection than mature economies, which often have greater access to alternative sources of funding.”

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Based on measures of protection available relative to that needed, Swiss Re has developed Insurance Resilience Indices. These Indices take into account how insurance protection helps households withstand numerous shock events, including: nat cats, death of a household’s main earner, and healthcare spending.

The analysis finds that the protection gap for these three risk areas combined has more than doubled from 2000 to 2018, to a huge $1.2 trillion.

However, Swiss Re adds that in relative terms, resilience has improved in most regions since 2000, with the aggregate index for the three perils having improved in both the advanced and emerging markets.

According to Swiss Re, the key takeaways from the research at an individual peril level are the increase in aggregate advanced market resilience to nat cat risks, and the strengthening of mortality protection in the emerging markets. Swiss Re also highlights the progress made in closing the health protection gap in the Asia Pacific region.

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