Zurich: Energy and food security crises are redefining insurers’ priorities, with increasing focus on building economic resilience and facilitating transition to green energy, report says from Swiss Re published on Friday.
Hit first by the Covid-19 pandemic and now by the raging war in Ukraine, the once globalized and interconnected world economy is fragmenting in a multipolar world, underlines the study by the Swiss reinsurance giant.
This has raised growing concerns about supply chain resilience and energy and food security, even as central banks suddenly raise interest rates to counter runaway inflation.
The dramatic changes are having a profound impact on the insurance industry, according to the Zurich-based group, which acts as an insurer for insurers.
“We are living through a paradigm shift,” Swiss Re chief economist Jérôme Haegeli told reporters ahead of a major insurance convention in Monte Carlo.
“We have a crisis in the global economy,” he said, adding that “we are facing a real economic storm, probably less like a hurricane that is going away, but more like a tsunami that is coming through. waves”.
Ongoing supply chain restructuring risks dealing a blow to marine insurers forced to cover rising costs and business losses, but it could also open up new markets for insurers, according to the report.
“Supply chain restructuring is expected to create investment in new infrastructure and production facilities, thereby increasing demand for engineering insurance,” Swiss Re said.
In a scenario where manufacturers in many advanced markets move production capacity to their home countries, known as relocation, global business activity would likely drop, but Swiss Re said its simulation indicated that additional investment in plants and equipment to expand domestic production would offset the negative effect. , boosting global economic growth by an average of 0.18% each year from 2022 to 2026.
This scenario, which would drive most of the growth in the United States, Britain and Germany, “is expected to generate an additional $30 billion in global commercial insurance premiums over the next five years, driven primarily by engineering, property and liability coverages,” Swiss Re said.
Efforts to switch to green energy, requiring the construction of new infrastructure that will need to be secured, are meanwhile expected to generate additional energy sector premiums of $237 million by 2035, according to the report.
Swiss Re economists also underscored the important role insurers can play in improving food security, highlighting how agricultural insurance can help farmers maintain their income levels and continue to farm even in the face of disasters. crop losses.
Global agricultural insurance premiums are expected to reach $80 billion by 2030, up from $46 billion in 2020, he said.