"The global economy has become much more fragile again" as a result of inflationary pressures, unresolved supply chain disruptions, and the Ukraine war, according to the IMF. Munich Re's chief economist, Michael Menhart, spoke at the annual meeting of the Geneva Association Economic Forum in late June. "The main concern remains inflation." Going forward, I expect inflation to be lower than in 2022, but still very high and above central bank targets."
According to Swiss Re chief economist Jérôme Haegeli, a number of advanced economies are headed for inflationary recessions, though he did not specify which countries. An inflationary recession is characterized by slowing GDP growth and high inflation.
"It's cyclical stagflation on steroids," Haegeli said.
"Exiting the negative interest rate environment and higher interest rates are a big positive for our industry," he added. Finally, risk-free rates are no longer return-free."
Economies will deal with sociopolitical consequences for the duration of the inflationary period. The economists advised the insurance industry to brace itself for rising social tensions, obstacles to the green transition, and geopolitical divisions.
Insurers can react to inflation in a variety of ways. Inflation-linked investments, reserve adjustments, risk repricing, product innovation, productivity increases, and loss prevention are among the tools at their disposal.
"In a time of surging inflation, the insurance industry is well equipped to support its customers while preserving its own financial strength, through product innovation, increased emphasis on loss prevention, and enhanced productivity," Geneva Association managing director Jad Ariss said. "As social tensions rise, insurers will fully play their proven role in mitigating social inequalities and protecting people and businesses."