October 16, 2018 09:30
Photo : Freepik
The economy is not ready to face the next financial crisis. By posing this statement, Swiss Re joined the ranks of firms that have this concern.
But this is not all. Swiss Re, affirms that the life insurance companies could be among the players tested at the next sharp drop in equity markets.
Following the holding of the annual G20 summit and the annual conference of the World Bank and the international monetary Fund, Patrick Saner, senior economist, global senior at Swiss Re, has put this constant in a note from the bulletin Economic Insights. The Journal of insurance has obtained a copy.
In his note, Mr. Saner stated that there was a lack of will to increase the resilience of the economic system. However, the margin of maneuver of central banks will be more limited during the next financial crisis, he warns.
“No news does not necessarily mean good news. The international community has not reached consensus on what should be its vision to ensure market growth. The economies are far more integrated, including the emerging markets. Public debt levels are higher. The income disparity between rich and poor is more marked. The challenges are much greater than in the past. Despite this, economic decisions are more decentralized, ” said Mr. Saner.
A solution : reduce the barriers to investment
For Swiss Re, it is important to reduce the barriers to investment in order to enable the implementation of various projects. Mr. Saner said that they believe the insurance industry would benefit from it, both on the underwriting risk of the accumulation of assets.
“The next crisis will present nearly the same characteristics as the other : the central banks will reduce their rates and buy assets. The problem is that they do not all have the same leeway. However, given the lack of cost-effective solutions for concrete and sustainable, expect is the only realistic option, ” said Mr. Saner, who had used the term English-speaking kicking the can down the road to illustrate his point.
Swiss Re also said to believe that the life insurance industry will suffer, as will its policyholders. “With very low yields, people will have less of a tendency to rely upon the hedges of life insurance. This will increase the gap of protection between people who are insured and those who are not. “
The reinsurance and protectionism
Swiss Re has also echoed his previous stance on protectionism, focusing this time on the impacts of a trade war on the reinsurance industry. Two elements stand out. The first, if the economy slows down, the premium growth will slow down also. Reinsurers have experienced during the last financial crisis, says Swiss Re. Then, if inflation is higher than expected, the results of insurers and reinsurers will be affected.
“A trade war is the risk number one from our economic forecasts. We can not exclude that the tensions current tariff leads to more equitable trade. It is a scenario very uncertain, but the G20 does not exclude it “, concludes Mr. Saner.