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NEW YORK, June 11, 2020—The world’s 10 largest insurance markets are cumulatively expected to see their Gross Domestic Product (GDP) decrease by 4.9 percent in 2020 compared to 2019 because of COVID-19, according to a new Insurance Information Institute (Triple-I) report.
“Given the scope of the downturn so far in China, North America, and Western Europe, the virus’ continuing expansion in the Southern Hemisphere, and the possibility of further rebounds in the former this fall and winter, the likelihood of a V-Shaped recovery is extremely low,” writes Dr. Michel Léonard, Vice President & Senior Economist, Triple-I, in his just-released Global Macro and Insurance Outlook: Q2 2020. “The most likely outcome for the rest of 2020 is a slow recovery, with multiple false starts and step backs, that does not stabilize until well into 2021.”
The world’s 10 largest insurance markets, in order, as defined by total premium written in 2018-2019, are: the United States, China, Japan, the United Kingdom (U.K.), France, Germany, South Korea, Italy, Canada, and Taiwan. A nation’s GDP is the total value of the goods and services produced within its boundaries. The Triple-I’s projection of the 4.9 percent GDP decrease in the world’s 10 largest insurance markets was weighted based on the total premium written in each one.
“The damage to global growth already done by mid-year is the equivalent of every business in New York, Pennsylvania, Texas, Florida, and California shutting down for a full year; the entire working populations of both the U.K. and France being laid off in less than 8 weeks; and a city roughly the size of Boston losing its entire population over the same period. And while we hope the worst has passed in the U.S., Canada, and Western Europe, notwithstanding infection rebounds in the fall and winter, it is important not to overlook new daily cases around the world growing at a record pace and global viral hotspots emerging from Brazil to Russia and in Mexico,” Dr. Léonard states.
Before offering an assessment of the Global Insurance Outlook, Dr. Léonard’s report gives a Global Macro overview of the variables which impact all economies: Growth & Inflation, Monetary & Fiscal Policy, and Political Risks. The Triple-I’s Senior Economist points to China’s recent actions against self-rule in Hong Kong as “the most significant threat to global political stability.”
“Premium growth is tied to economic activity,” Dr. Léonard writes, and this year’s U.S. auto insurance premium relief initiatives and a reduced interest in products like travel insurance will dampen premium growth in those two lines in this country. COVID-19, however, could lead to premium growth globally for insurance products such as warranty and indemnity (W&I), cyber, and captives, the report notes.
W&I provides coverage for the successful completion of business transactions, cyber guards against the economic fallout of a data breach and similar events, while captives are a form of self-insurance created and wholly owned by one or more non-insurers to provide captive policyholders with insurance coverage.
Video:Global Macro and Insurance Outlook Q2 2020 (June 11, 2020)