Global big picture changes elevate insurance role: Swiss Re
Insurance will be critical in driving resilience as renewable energy take-up accelerates, global supply chains change and food security becomes a rising focus, a Swiss Re Sigma report says.
“Six months into the war in Ukraine, our world has changed dramatically,” Swiss Re Group Chief Economist Jerome Haegeli says.
“Triggered by the war and the pandemic, we are shifting from an interconnected to a multi-polar world faced with disrupted supply chains, energy and food crises.”
Insurance is becoming even more vital to the economy, contributing to financial stability by covering supply chain risks, while it can also facilitate the transition to a green economy by insuring and investing in renewable energy, and can contribute to global food security by expanding agricultural insurance, he says.
Covid-related disruptions and the Ukraine war have prompted companies to look at returning parts of their supply chains to home markets, while interest in “friend-shoring”, where the focus is on countries where relations are less fraught, has also picked up.
Reshoring is forecast to generate an additional $US30 billion ($43.8 billion) in global commercial insurance premiums over the next five years, mostly from engineering, property and liability covers, Swiss Re says.
Friend-shoring would add $US3 billion ($4.4 billion) in premiums. Marine and trade credit premiums would decline slightly as global trade is expected to slow.
The invasion of Ukraine has added urgency to a shift to renewables already underway in response to climate change.
Swiss Re says in the report, Maintaining resilience: the role of P&C insurers in a new world order, that the insurance industry can assist in the transition by providing covers for the complex risks inherent in constructing and operating renewable energy infrastructure.
The report also says supply chain disruptions and the Ukraine crisis have fuelled soaring food prices, while droughts and heavy rains in key farming countries have led to crop failures.
Swiss Re says climate change risks are set to increase, and despite challenges to expanding insurance cover from both the supply and demand perspective, global agriculture premiums are forecast to rise to $US80 billion ($116.9 billion) by 2030, from $US46 billion ($67 billion) in 2020.
“Overall penetration remains low, particularly in emerging markets,” it says. “We see public private partnerships as an effective tool to extend insurance reach.”