sigma Resilience Index 2024

The world economy gained resilience in 2023, as higher growth and interest rates replenished countries’ fiscal and monetary buffers, and the impact of shocks, such as the war in Ukraine and inflation surge, subsided. Insurance resilience either increased or was stable across the four perils we track of crop, natural catastrophe, health, and mortality. This reflected a general focus on the shock-absorbing role of insurance for households, farms, and businesses. In 2023, we saw signs of individuals and policymakers worldwide recognising the benefit of higher insurance protection and taking steps to increase insurance coverage, and hence resilience.

Higher insurance resilience is associated with positive economic outcomes for a country, studies show. For example, a large-scale natural catastrophe is found to have a smaller negative impact on a country’s GDP if there is higher insurance cover. Food security can benefit from higher crop insurance, which reduces the financial burden of loss events and stabilises income, and so crop production for farmers. Private medical insurance can complement public health systems and offer faster access to services when health stresses hit, resulting in stronger health and economic outcomes.

However, uncertainty is elevated globally, and unforeseeable shocks beyond baseline scenarios are more frequently impacting economies at both macro and micro levels than in the past. As a result, we believe it is vital to understand what drives risk absorption, the contribution of insurance, and the actions we can take to strengthen resilience.

Our macroeconomic resilience index captures the extent to which an economy can withstand a shock, such as a recession. Our insurance resilience indices measure how insurance contributes to maintaining households’ and businesses’ financial stability by transferring or absorbing risks to life, health, and property. The protection gap is the uninsured or unprotected portion of the resources needed to fully mitigate risk.

Figure 1. SRI Macroeconomic Resilience Index
_{Hover over the respective countries to view the scores}

Global macroeconomic resilience improved in 2023, our index increasing by 7% year-on-year, and fully recouped all losses incurred during the COVID-19 pandemic and recession in 2020. The primary driver was greater monetary policy headroom, as inflation in many economies declined while central banks kept interest rates elevated. Fiscal headroom also benefited from economic growth that was above consensus expectations.

Advanced economies’ resilience increased by 11%, predominantly from strengthening monetary headroom as interest rates were kept high while inflation fell. Emerging economies’ resilience was flat year-on-year as most tightened monetary policy in 2022, and in 2023 faced a challenging climate of a strong US dollar and capital outflows.

We expect macroeconomic resilience to grow by only 1% in 2024, driven by still-sticky inflation and increasing debt levels in many regions, slowing US growth and expected declines in interest rates.

The medium-term outlook may be still more challenging. We expect a less favourable growth/inflation mix than in the pre-pandemic decade. Government debt to GDP levels are still rising, which is likely to pressure fiscal resilience, and fiscal consolidation measures could pose headwinds to growth. To prepare for future shocks, policymakers may consider strategies to support macroeconomic resilience in the long term, for example by investing in areas such as capital markets depth and greater insurance penetration.

Global insurance resilience was stable at 58% in 2023. The year saw gains in mortality resilience due to higher life insurance take-up, and in emerging markets’ health resilience, supported by greater private health insurance, partly offset by weaker health resilience in some advanced regions.

We estimate the global protection gap across perils reached a new high of USD 1.83 trillion in premium equivalent terms in 2023. This is up by 3.1% in nominal terms from a restated USD 1.77 trillion in 2022. The global protection gap has grown by 3.6% annually in nominal terms since 2013, roughly matching nominal GDP growth trends.

Figure 2. Annual growth rates of the global protection gap and global GDP, in nominal terms

The global crop resilience index was marginally higher year-on-year at 43.5% in 2023. The last decade has seen enormous progress, as advanced markets and China led contributions to growing crop resilience. The crop protection gap stood at USD 77 billion in premium equivalent terms in 2023. 

We expect a renewed increase in the crop insurance resilience index in 2024, driven by strong expected agroinsurance premium growth in China (~ 20%) and ongoing impacts from the recently-reformed public agroinsurance programme in India.

Figure 3. The five largest global markets for crop output, and their SRI Crop Insurance Resilience Indices and protection gaps

_{Click on the respective countries to view the scores}

Natural catastrophe resilience rose to 25.7% in 2023. The year featured a high proportion of severe convective storms, especially in the US, a peril that is relatively more insured than others. However, three quarters of global disaster exposure is not protected by insurance. The protection gap was USD 385 billion in premium equivalent terms, up by 5.2% year-on-year.

The past 10 years have seen improvement in global natural catastrophe insurance resilience. However, the key driver has been a strong rise in advanced markets resilience, which increased to above 38% in 2023 from around 35% in 2013. In emerging markets, resilience is typically still extremely low, and regions are almost entirely unprotected from natural catastrophe risk.

Figure 4. SRI Natural Catastrophe Insurance Resilience Indices: scores, rankings and protection gaps by country

Our health resilience index was stable at 77.7% in 2023, implying about 22% still-untapped global coverage of additional private medical insurance. The global health protection gap grew by 5.4% to USD 941 billion in premium equivalent terms.

Global mortality resilience improved year-on-year in 2023, to 44.4%, but is still slightly below the 46.5% score of 10 years ago. The mortality protection gap was flat year-on-year at USD 414 billion in premium equivalent terms in 2023, after China’s protection gap declined.

China’s mortality protection gap narrowed by 6% year-on-year to USD 73.6 billion in premium equivalent terms in 2023, driving its resilience index up to 38.3% from 36.0% in 2022. We estimate that greater life insurance coverage contributed 1.2 percentage points of the 2.3 percentage point improvement. Slowing growth in household income and a decline in the size of mortgages, due to economic weakness and structural headwinds, especially in the property market, resulted in lower growth in protection needed than protection available.

We expect China’s protection gap to remain stable or decline slightly in near term due to the economic context. This is expected to contribute to stabilising the overall protection gap in Asia, and so a steady level of resilience as a result.