Reinsurance giant Munich Re has pointed to how a two-year drop in global trade levels has hit insurance premium income, over fears this downturn could be exacerbated by an era of nationalism that pushes the globe towards economic decline.
After several decades of global trade moving towards steady growth, 2015 and 2016 saw the global economy take a step back as international trade significantly contracted, according to Munich Re, due to faltering economic activity.
And with premium income rising and falling in conjunction with developments in global trading volumes, fears remain high that with the winds of protectionism sweeping through Western countries, a continued drop in global trade will see reinsurance industries come under strain.
Munich Re said that sectors such as marine insurance, that have already felt the strain of market volume decline, could be heavily impacted.
The new U.S. administration has already sought to implement many of Trump’s more extreme policies, and should his threat to introduce import tariffs be enacted, and trade partners hit back, Munich Re says consequences for the global economy could be immense.
“The International Monetary Fund (IMF) stated in 2016 that three-quarters of the slowdown since 2012 has been due to the weakened global economy. Lower investment means that fewer commodities and less machinery are being imported from other countries. Over the last three years, China’s imports have been much lower than during its boom period. This has had a strongly negative impact on the economies of other exporting countries,” said Munich Re.
On a global scale, premium volume has been stagnant, and in 2015, global premiums of around US$30 billion had once again dipped back down to 2010 levels.
Munich Re has warned insurers and reinsurers not to “rely on shrunken trading volumes being just a short-term blip,” and said “the industry should not bank on a significant increase in premium volume for the current year.
“Free trade and the global exchange of goods form the basis for growth and prosperity in the global economy. Abandoning the efforts to work towards fairer globalisation, and instead turning towards nationalistic isolation, would harm everyone in industrial countries, emerging markets and developing economies,” added Munich Re.