The post-pandemic situation has seen risk awareness rise at the same time as rising inflation increases costs for underwriters and increases pressure on insurance buyers to take on higher premiums, Swiss Re Asia’s Chief Economist John Zhu says.
Mr Zhu said inflation is a big problem for insurance companies, especially in the area of property and casualty, and it is a problem for their customers. Central banks around the world have raised interest rates to curb inflation, putting interest rates on economic growth, further adding to uncertainty.
“We’re at an interesting risk, where one of the issues we’ve been talking about in the recent pandemic is awareness of risk, and I think that issue is still there,” Mr Zhu told insuranceNEWS.co.au during a visit to the insurer. Sydney.
“But if we are right and we are coming, at the end of 2022 and 2023, in the financial environment of the world, then there are also bruises to get out of slowing economic growth and rising unemployment.”
The rising prices of essential items such as petrol, energy and food are currently causing fear and, with insurance not placed in the same category and not high, insurers will be thinking about affordability and pain from consumers. thoughts, Mr Zhu says.
Australia’s economy has benefited from low unemployment and strong exports, while inflationary pressures have led to higher inflation. Swiss Re expects wage growth to pick up and eat into the high-cost environment even if some of the pressures will moderate.
The Reserve Bank of Australia (RBA) on Tuesday raised the interest rate by half to 2.35%, marking the fifth consecutive monthly hike as it aims to keep inflation at 2-3%. The RBA’s forecast is that inflation will be close to 7.75% this year and more than 4% higher than next year.
“Our view is that the interest rate may not be far off, but it is not the same as saying that it will return to the desired 2-3%, soon,” Zhu said.
Research shows that bottles found in the Asia-Pacific region may have already risen, assuming there are no new shocks, and considering that supply chains are weaker than previously thought. The recent covid-related lockdown in China has not had the disruption it has experienced before.
Mr. Zhu said that global disruptions are becoming more frequent, frequent, and persistent, and some companies are looking to create similar arrangements as they exchange funds to cope.
In the long term, Australia could see benefits from the Regional Comprehensive Economic Partnership (RCEP), signed by 15 countries in November 2020. The RCEP, which came into effect in Australia in January, covers a region that accounts for about 30% of the total of the world. medicine is about one third of the people in the world.
Mr Zhu said investment will be needed by countries and the construction and transport industries to make a profit, but removing trade barriers would significantly change the trade environment.
“Reducing trade barriers is always good in our opinion for promoting trade flow, allowing the economy to grow due to more opportunities and bigger markets, but it is not as easy as it requires investment, and this investment takes many years,” said Zhu. “On the P&C side it offers a lot of opportunities to think about how these chains will change in this big area.”
Looking to the future, insurers will also benefit from a better financial environment, central banks are not expected to return to the methods that were used during the global financial crisis and the pandemic. The RBA kept the rate at 0.10% from November 2020 to April this year.
“Central banks are moving away from a period of very low interest rates or negative interest rates, negative yields on certain bonds, and a kind of large-scale monetary experiment, or other non-monetary measures,” Zhu said. “That’s not really bad news. I think insurance is, in fact, a good development in the short term. “