Global output decline of $12tn too big for insurers
Source: Middle East Insurance Review | Dec 2020
Global output could take a hit of $12tn by end of next year due to the pandemic and this would be a burden far too high for insurers to cover, according to Swiss Re chief executive Christian Mumenthaler.
Speaking at a Bloomberg financial conference and reported by Reuters, Mr Mumenthaler said, “We think the output loss for the world over these two years will be $12tn. And the balance sheet of insurers are a tiny fraction of that. So a pandemic is a risk that cannot be diversified and therefore it cannot be insured.”
“Overall the insurance industry has handled this well because it entered the crisis with lots of capital. So it knew about the risk,” he said.
Mr Mumenthaler said many market players hedged early, figuring the COVID-19 respiratory disease would spread around the world after first being identified in China late last year.
He said, “The overall loss as we can see it now – between $50bn and $80bn – is manageable for the insurance industry. You compare that to more than $140bn in 2017 in terms of natural disaster losses.”
“What didn’t work well is the understanding of what is covered. Pandemic, and that’s known by the insurance industry, is not a risk you can cover,” he said.
A Swiss Re spokesman said the $12tn estimate referred to the level of economic output after COVID-19 compared with where the global economy would have stood had it grown at the average rate before the pandemic hit. M