Robbing Peter to pay Paul

Nationalisation of private assets poses grave risks

Faced with the problem of rising public indebtedness and the need to stimulate their flagging economies, populist pressure groups in some countries have been clamouring for the nationalisation of large pools of assets. The purpose would be to use the appropriated funds to shore up other industries in the country concerned. Up to now, the focus has been on assets saved in private pension schemes. Indeed governments in Hungary, Poland and Argentina have already embarked on such courses of action.

Such policies would amount to a partial confiscation of insurers’ assets. Insurers could resort to capital flight if such policies spread. Moreover, the trust placed in insurers’ ability to pay in the case of claims could be weakened. This is just one of the potential emerging risks analysed in Swiss Re's 2017 SONAR publication.

Says Swiss Re investment strategist, Jerome Haegeli: "Policy uncertainty and political risk frighten away long-term investors. So if policymakers want to attract long-term, private-sector funds into their economies, they first need to foster a suitable stable, predictable environment."

Supporting financial resilience

Re/insurance supports financial resilience by acting as a shock absorber and promoting growth through its core businesses. This is particularly important in a challenging and volatile macro-economic environment.

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