sigma 5/2019: Indexing resilience
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The latest sigma is an industry-first. We have constructed new indices that go beyond the traditional GDP growth measures for economic strength, and introduce a systematic approach to quantify insurance protection gaps. By "indexing" resilience, we show that the insurance industry continues to make society more resilient, even as the capacity of the global economy to absorb new shocks has waned and is now lower than before the global financial crisis ten years ago.
A primer for insurance markets and economies
Swiss Re Institute and the London School of Economics have together constructed a Macroeconomic Resilience Index, ranking countries with respect to a broad spectrum of variables to offer a much more holistic assessment of economic health than gross domestic product alone. Separately and independently, Swiss Re Institute has developed innovative Insurance Resilience Indices for three core areas of risk: natural catastrophe, mortality and healthcare. We find that resilience backed by insurance has improved in both the advanced and emerging markets since the turn of the century.
A few more specific key findings from our indices include:
- The Swiss and Canadian economies consistently rank among the Top 3 most resilient in the world.
- The advanced economies have become less resilient since 2007, and the emerging economies more so.
- In relative terms, the biggest improvements in economic resilience since 2007 have been Asia and countries with close links to the region. Australia, for instance, has benefitted from proximity to and links with China.
- From the insurance industry contribution perspective, there has been notable improvement in property catastrophe resilience in the advanced markets, and in mortality protection in the emerging economies.
- There has also been significant progress in closing the healthcare protection gap in Asia Pacific.
- By closing the record-high protection gap of USD 1.2 trillion for the three areas of risk, the insurance industry could boost global financial resilience to the tune of more than USD 1 trillion in claims payouts each year.
- Further, closing the gap could yield additional profit potential of USD 60-80 billion for the industry annually.
Read our sigma to find out more.