Swiss Re Ag · SIX:SREN
Swiss Re — Investor Presentation (September 2019)
23 slides from Swiss Re's investor presentation, Sep 7, 2019
Slide 1: Indexing resilience
Indexing resilience A primer for insurance markets and economies: starting the USD 1trillion debate Dr. Jérôme Haegeli, Group Chief Economist Monte Carlo, 7 September 2019 (sigma 5/2019)
Slide 2: R-word(s) in focus. Resilience is key!
R-word(s) in focus. Resilience is key! R R 35% >USD 1trn / year Recession risk Risk pools Economic Resilience (additional) Insurance Resilience 2
Slide 3: Welcome to our new «R-index» family
Welcome to our new «R-index» family Resilience: The ability to absorb shocks SRI-LSE Macro Resilience Index SRI Insurance Resilience Indices Tracks the ability of economies to withstand Measure the contribution of insurance to the shocks over time financial stability of households and organisations
Slide 4: Macroeconomic Resilience
Macroeconomic Resilience ”The global economy is less resilient to absorb shocks than 10 years ago given excessive debt, lack of growth enhancing reforms and monetary policy pushed beyond its limit.’’ 4
Slide 5: Years after the global financial crisis: The world is less resilient
10 Years after the global financial crisis: The world is less resilient High debt Negative yielding Lower economic burden bonds growth +70trn 17trn -2%pts Sources: IIF, Swiss Re Institute, BoC 5
Slide 6: Winter is arriving for global macro. 35% likelihood for US recession
Winter is arriving for global macro. 35% likelihood for US recession EMs will continue to grow significantly faster than DMs Top macro risks for 2019/20 EMs will continue to grow significantly faster than DMs (likelihood) Top macro risks for 2019/20 (likelihood) Trade war 35% US recession Euro area:
Slide 7: SRI-LSE macro resilience index: going beyond traditional GDP analysis
SRI-LSE macro resilience index: going beyond traditional GDP analysis to track economic resilience. See today’s top resilient countries & the top movers Macroeconomic resilience factors Top macro resilient (2018) Top movers (2007 to 2018) Rank change Macro Buffers Country Rank Country Rank since ‘07
Slide 8: Lower G4 macro resilience since 2007, but improvements over last years
Lower G4 macro resilience since 2007, but improvements over last years: next recession likely to be more prolonged, even if not as deep SRI – LSE G4 macro resilience index and Fiscal policy the «only game (left) in town» structural elements 0.7 0.6 Resilience Index Fiscal policy space 0.5 Monetary p
Slide 9: Six global macro resilience take-aways
Six global macro resilience take-aways Fiscal policy = “only game in town” in ↑Domestic resilience = ↑ Global 1 the next crisis 4 resilience Central banks’ low to negative rates Sound fiscal positions, deep financial 2 do more harm than good 5 markets = + Macro resilience Lower buffers & insufficien
Slide 10: Insurance Resilience
Insurance Resilience “Resilience against core areas of risk – such as natural catastrophes, mortality and healthcare spending – improved, as shown in our new SRI Insurance Resilience Index. Importantly, the risk transfer to insurance markets promotes macroeconomic stability.” 10
Slide 11: SRI Insurance Resilience Indices: New record high protection gaps
SRI Insurance Resilience Indices: New record high protection gaps Starting the USD 1 trillion debate Protection Gap Insurance Resilience Need (N) Available (A) (N – A) Index (A ÷ N) Expected annual loss from Estimated insurance Nat Cat storms, earthquakes and coverage for primary nat USD 222bn 24% f
Slide 12: The resilience gap remains huge, even as it improved mostly on Nat Cat
The resilience gap remains huge, even as it improved mostly on Nat Cat in advanced countries and with large gap in emerging markets SRI Insurance Resilience Index: SRI Insurance Resilience Index: Advanced economies Emerging economies 65% 42% 3% 37% 94% 75% 23% 64% 100% 100% 80% 80% 60% 60% 40% 40% 2
Slide 13: Opportunity and Risk Pools
Opportunity and Risk Pools ‘’Closing the insurance protection gaps is a one trillion dollar opportunity to boost global financial resilience.’’ 13
Slide 14: The protection gap has more than doubled over the past two decades
The protection gap has more than doubled over the past two decades Protection gap in advanced and emerging economies Untapped resilience opportunity = New risk pools 456 400 additional claim 300 >1trn payments USD bn 200 208 175 159 100 116 115 103 98 91 91 73 68 45 34 0 US & EMEA Asia-Pacific Latin
Slide 15: Insurance resilience bolsters the overall economy, especially for emerging economies
Insurance resilience bolsters the overall economy, especially for emerging economies 1) Effect of more insurance coverage 2) Variables correlated for cat losses on economic variables with lower economic volatility stronger recovery (GDP higher non-life insurance growth) penetration less government s
Slide 16: Call for Action
Call for Action Support Financial market Data analytics trend growth infrastructure Enabling Private capital market Lower regulation solutions excessive debt Source: Swiss Re Institute 16
Slide 17: Conclusion
Conclusion “Narrowing protection gaps is a USD1 trn opportunity and makes not just commercial, but also economic sense.“ 17
Slide 18: Key takeaways
Key takeaways Starting the “1 trillion dollar debate” in improving resilience Macro: With monetary policies at or beyond their limit, fiscal Less resilient than pre-crisis policy will be the “only game in town” in next crisis Insurance resilience has improved in most regions, but Insurance: global r
Slide 19: Appendix
Appendix (im) Swiss Re Institute 19
Slide 20: SRI-LSE Macro Resilience Rankings
SRI-LSE Macro Resilience Rankings Change Mon. Low Fin. Labor 2018 Fiscal Insurance Human Econ. Banking Industry in rank Ave. Ave. Rank Country Pol. Carbon Market Market Resi. Space Penetration Capital Compl. Backdrop 2007 07 to 07-11 14-18 Space Econ. Dev. Eff. Index Rank 18* Rank Rank 1 Switzerland
Slide 21: SRI-LSE Macro Resilience Indicators
SRI-LSE Macro Resilience Indicators Indicator Weight Rationale We consider fiscal policy the most important policy tool to mitigate buffers Fiscal space 35% Macro the length and depth of an economic shock. Monetary policy space 15% Monetary policy is a key policy instrument to absorb economic shocks
Slide 22: Macro resilience levels across regions and time
Macro resilience levels across regions and time 0.9 0.8 0.7 0.6 0.5 0.4 0.3 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Latin America North America Eurozone WORLD Asia & Oceania Sources: SRI-LSE Macroeconomic Resilience Index 22
Slide 23: Legal notice
Legal notice ©2019 Swiss Re. All rights reserved. You are not permitted to create any modifications or derivative works of this presentation or to use it for commercial or other public purposes without the prior written permission of Swiss Re. The information and opinions contained in the presentati