As geopolitical risks mount, stay focused on partnerships

Geopolitics have never been more complex, as the war in Ukraine and the ongoing pandemic disrupt supply chains, fuel inflation and threaten economies with recession. As insurance companies prepare for the upcoming Rendez-Vous de Septembre (RVS) meeting in Monte Carlo, the evolving risk landscape is a reminder to our industry to stay focused on what it does best: Partnering to absorb the shocks of a volatile planet.

I just had the chance to listen to former US CIA Director John Brennan and Angel Gurría, who until 2021 led the OECD. Brennan and Gurría advise Swiss Re on geopolitical challenges as members of our Strategic Advisory Council, and they sat down recently with some of our largest global insurance clients to offer their insights into the dynamic environment we’re now facing.

What they had to say was sobering. The current political and economic landscape ranks among history's most challenging eras — even for crisis-tested leaders with "relatively thick skins," as Gurría put it. As we head into our RVS Monte Carlo meetings in September, the landscape continues to change very quickly. Partnerships, within industry and with the public sector, will be critical to navigating the volatility.

Since the COVID-19 pandemic began, we've been absorbing supply chain shocks, as lockdowns disrupt shipping and countries stockpile food. With the war now affecting Black Sea grain shipments, the United Nation's FAO Food Price Index has climbed dramatically from a year ago. This has real consequences: The World Bank says every percentage point increase in food prices sends 10 million more people into extreme poverty.

Skyrocketing inflation has finally driven central bankers to begin raising interest rates, but the potential for a "hard landing" is growing as nations' economies tilt toward recession. We're also seeing European nations asking citizens to cut energy consumption, in preparation for potentially more-restrictive measures as the weather turns colder and the war impacts energy markets.

These elements are troubling, since steeply rising food prices and prospects of an energy crunch are factors that could drive civil discord, as they have in the past. Brennan and Gurría raised the possibility that social cohesion could come under increased strain. In recent months, we’ve seen escalating unrest in Sri Lanka, as well as strikes in some European countries, citing just a few examples of simmering frustrations over rising costs.

To further complicate matters, all this comes as our planet is struggling with the worrying symptoms of climate change. In northern Italy, the Po River, the country's longest, is nearly dried up, while a quarter of France's 101 departments have declared drought conditions. On the other side of the world, Australia and much of Asia are still mopping up after destructive flooding.

"I cannot remember a time in the last 40 years when we've had such a multitude of issues simultaneously," Brennan told our group.

But he and Gurría were by no means merely throwing up their hands in despair. Even when crises multiply as they are doing today, it is no time to let ourselves, our companies, or our countries become paralysed. We cannot allow ourselves to simply admire the problem, Brennan said.

I couldn't agree more. When we encounter a problem, there's always something that can be done.

At Swiss Re, we've been gathering data for 160 years on a multitude of risks. This information shapes our own risk appetite and creates a firm foundation to pass these learnings on to our clients. Using a collaborative approach, our risk transfer solutions help clients to better understand potentially costly exposures, manage downside risks and speed recovery when an event occurs.

Insurers have another clear call-to-action: to work together to narrow the USD 1.42 trillion insurance protection gap that, unfortunately, widened again in 2021. Behind this growing gap are four decades of steadily rising income inequality in many advanced economies. Inequality erodes trust in institutions and acts as a brake on economic growth.

Insurance is a key part of the antidote, since it is known that low- and middle-income families face the threat of falling into poverty should they be without protection when disaster hits. In partnership with the public sector, technology and digitalisation can be deployed to reach members of groups long underrepresented among insurance consumers.

Bringing industry executives together to meet with leaders like Brennan and Gurría about the issues that keep us awake at night creates fertile ground for pragmatic solutions to take shape.

This applies to RVS Monte Carlo, too, where we'll gather to discuss how natural catastrophes, man-made risks and cyber threats are contributing to the tightest re/insurance market in years. We'll also have a chance to talk about the impact of skyrocketing inflation on potential claims and rates. And we'll revisit how strong partners like Swiss Re will be there with capital to contribute to preserving stability, or better yet, create opportunities for growth.

While Brennan and Gurría's stark assessment of the state of global affairs reinforced how serious our challenges are, their words had an inspiring effect on me, too. They left me more convinced than ever of our industry's common purpose: to deploy the risk knowledge we've acquired over generations to help restore equilibrium to a planet going through a very bumpy transition.