sigma 6/2019: Sustaining resilience

Global economic and insurance outlook 2020/21

Following on the comprehensive exercise to "index resilience" in the sigma published in September, the next edition says insurance is sustaining resilience, even as the global economy slows.

As we predicted, last year marked the peak of the economic cycle, and our current forecasts for US and euro area growth of 1.6% and 0.9% in 2020, respectively, are both below consensus. The most notable down revision is to our forecasts for the euro area: we see the region at risk of entering a period of low growth, low inflation and low interest rates, so-called "Japanification".

The number 1 risk to the world economy remains US/China trade tensions.
Jerome Jean Haegeli, Group Chief Economist, Swiss Re Institute

The main risk to global growth is the US/China trade conflict. The risk of technical recession in the US next year remains elevated, but the likelihood of recession is unchanged over the last 12 months. Globally, low and even negative interest rates are set to stay.

The macro effects are very real and already being felt, in particular the effect of the uncertainty being created. Uncertainty is the enemy of the business cycle.
Jerome Jean Haegeli, Group Chief Economist, Swiss Re Institute

All in all, the world economy has become less resilient and, with monetary policy options all but exhausted, a different policy mix is needed to restore resilience, the sigma says: less central bank action, more supply-side reforms to lift productivity, and more fiscal stimulus for growth-enhancing areas like infrastructure and sustainable investments. Insurance, meanwhile, continues to support resilience, all the more so important as growth slows: households and businesses can access financial compensation for loss events, enhancing the underlying capacity of an economy to absorb shocks.

The sigma forecasts that global non-life and life insurance premiums will grow by around 3% annually in each of 2020 and 2021, thanks to continued structural increases coming from Asia. Most demand will come from emerging Asia, in particular China; we forecast 9% growth in non-life and 11% growth in life premiums in China next year. A sector that is growing exponentially is the mid-market private medical sector, with premiums up 1500% over the last two years.

Resilience levels in other emerging markets could be strengthened significantly by taking learnings from the China experience.
Jerome Jean Haegeli, Group Chief Economist, Swiss Re Institute

Central figures and key data in this sigma

Further out, Swiss Re Institute forecasts that China will account for 60% of all insurance premiums in Asia over the next 10 years. Expanding risk pools will include non-motor personal, and medical and health covers.

News release, sigma alert & sigma archive


sigma Sustaining resilience amid slowing growth: global economic and insurance outlook 2020/21

See the previous sigma issues