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Insurance field after covid disease


The COVID-19 pandemic has caused the deepest recession since the 1930s, and global gross domestic product (GDP) is expected to shrink by about 4% in 2020. This will lower demand for insurance this year, especially life insurance; As it is expected that the volume of premiums will decrease by 6% for life insurances and by 0.1% for property insurances. Despite this, the industry is expected to recover from that recession, which is supposed to be short-lived, insurance premiums will start growing again and the economy will enter a phase of long-term recovery. It is expected that property and casualty insurance will be the main driver of insurance recovery again, and the largest share of this recovery will be for emerging markets, especially China.

At present, the Covid-19 crisis will cause premium growth (life and non-life) to decline by about 3% from the pre-recession period. However, it is expected that the total written premiums for both life and property insurances will reach 3% higher than the level of the volume of premiums at the time of the pandemic, during the year 2022, and this rise is strong if compared to the severity of the recession level for this year.

In 2019, global premium volume growth occurred steadily at just under 3%. There has been a slowdown in the growth of life insurance premiums; Where the volume of growth amounted to 2.2%. On the same approach, the Covid-19 crisis is expected to cause a slowdown in the growth of life premiums compared to the previous year, which will lead to a 1.5% contraction in the market size; Also, the group's demand for insurance products related to savings, whether for individuals or institutions, will decrease. This is due to high unemployment and low income. As for other types of insurance (other than life), the most types of insurance that will be exposed to a decrease in demand are motor insurance, travel insurance, and insurance related to business; Thus, those insurance branches will be the most affected. Regarding the general performance of the insurance markets; Emerging markets will outperform both life and non-life insurance.

The industry will be able to absorb the shock that it has been exposed to as a result of this crisis

The insurance industry was well capitalized before the pandemic which is largely able to absorb the shock it has experienced as a result of COVID-19. To date, the amount of final claims associated with property insurance remains uncertain; The average estimate obtained from various sources is about $55 billion, and this average is much less than the sum of the total losses of natural disasters that occurred last year. For example, the losses caused by Hurricane Katrina were about $90 billion (in 2019 prices) and the industry has absorbed those losses. Hence, the industry will face challenges related to the level of profitability. Investment returns will remain low and interest rates will remain low for a while, which will affect life and other types of long-term insurance, and on the other hand, if companies default on their debts, this can lead to losses in the invested assets. In addition, the preventive and precautionary measures that were imposed to contain the spread of the virus are likely to affect the profits of most commercial activities this year; As there will be a decrease in the volume of sales and income resulting from fees collected from individuals in many destinations due to the closure.

The profitability of the industry will be supported by the tightening of insurance rates and the acceleration of the development of protection requirements against new risks that have arisen as a result of the crisis

The COVID-19 crisis started at a time when non-life insurances are seeing price tightening, and this trend is expected to continue in commercial lines in particular, with capital scarce. The expected increase in demand for insurance should contribute to supporting profits in the long run. Moreover, the experience of the health system and the economic crises that occurred this year, will increase awareness of risks, which in turn will affect the increase in demand for insurance across many lines of business, including the demand for products that provide solutions to the effects resulting from those A pandemic (which in turn may require some form of government support given the unconventional nature of such a threat). The shock from COVID-19 will likely lead to an attempt to accelerate the development of other business models as well, such as restructuring global supply chains to mitigate future business disruption risks,

Which will lead to the emergence of new complexes regarding property and engineering insurances. In addition, there will be support and promotion for the trend towards digital transformation in both personal and working life, as well as there will be an incentive to accelerate the development of new insurance products and services.


>Gross written premiums will return to pre-pandemic levels in 2022

After 2019, global premium growth (life and non-life) will stagnate over the course of 2020 and 2021. Life insurance premiums in developed markets will shrink sharply, while the non-life sector will be less affected by the Covid-19 crisis and this will see this The sector has seen an improvement in premium growth rates. Emerging markets will outperform both sectors. COVID-19 will slow insurance market growth by nearly 3 percentage points. The extent of the decline in the gross premiums growth rate in 2020 due to the Covid-19 pandemic will be similar to that which occurred during the global financial crisis of 2007-2009, but the decrease resulting from the Covid-19 pandemic will be smaller than that decline. Which occurred during the global financial crisis, and it is not expected that the same continuous turmoil in the financial market that occurred at the time of the global crisis.

Macroeconomic environment for insurance companies

 COVID-19 has forced a radical change in the direction of the global economy. After the economy was expected to experience sluggish growth at the beginning of the year, the economy is now expected to experience a severe and deep recession in 2020, across all regions. There has been a rapid rise in unemployment, and many bankruptcies are expected. As a result, the demand for insurance will decrease due to the collapse in economic activity, so insurance companies have to expect lower returns for many years to come.

Growth and inflation forecasts in the global economy

Currently, global GDP is expected to shrink to nearly 4% in 2020, double the rate (‒1.8%) seen during the global financial crisis. Growth had been on the downside even before the onset of the COVID-19 pandemic early this year, after hitting a 10-year low of 2.5% in 2019. The COVID-19 pandemic has completely changed the fate of the global economy, and is expected to Most of the world’s 30 largest economies will witness a recession in 2020 due to the closure measures taken to contain the virus, but after the sharp economic contraction in the first half of 2020, a long-term recovery is expected in the second half of 2020 and until 2022 With inflation remaining low.

Europe is more affected than the United States

Given its resilience before the outbreak of the Covid-19 crisis, the shock to the economy in the United States of America is likely to be less pronounced, and therefore the American economy could recover in 2022 more strongly than in the European region. Many of the largest advanced economies are expected to contract 6.5‒7.5% in 2020, Italy and Spain will contract close to 10%, while Japan and South Korea will see an improvement in economic activity. Europe is also expected to recover only a portion of the lost output in 2022, with growth remaining below 4%.


China will also suffer

The activity is gradually returning in China, but the Chinese economy will suffer from stagnation as a result of decreasing demand globally. China is expected to grow by 2.7% in 2020, down 3.4% from 2019. There will be a recovery in 2022, with monetary support leading to an expected growth of 7%.

Emerging economies are lagging behind the curve of the COVID-19 pandemic, but will struggle until growth rates return to normal

Although emerging markets are somewhat lagging behind the epidemiological curves of COVID-19, they will be hit hard, especially those that have already been plagued by structural issues. GDP is expected to dwindle in the ten largest emerging economies. Low fiscal space, reliance on US dollar financing, strong capital inflows, as well as fragile health systems and infrastructure; It is one of the challenges posed by the epidemic. The collapse in commodity prices, especially oil, may benefit imports, but it will lead to some kind of pressure on the countries that export.

A rise in unemployment and bankruptcy rates, even with the huge solvency and monetary support measures in many markets

How quickly economic activity recovers, once lockdown measures are lifted, will depend on how effective the policy response is in containing lasting damage and second waves of infection, and the ability of health systems and investors to carry higher debt burdens. Despite the supportive monetary and fiscal policy measures, the Covid-19 crisis will cause many institutions and companies to go bankrupt and a sharp rise in unemployment levels; The crisis will therefore leave businesses and consumers in a weaker position even when the epidemic subsides.

Unemployment rates are expected to peak in the first half of this year and then begin to decline gradually. Various strategies have been used around the world to combat the rise in unemployment rates. In the United States, an unprecedented number of people have filed unemployment claims; In the 13 weeks since the start of the crisis, more than 45 million people have filed unemployment claims, nearly 6 million more than during the global financial crisis. Many European countries have begun implementing plans or programs to combat underemployment, whereby the state pays a certain share of wages if employees are retained for the period in which companies are closed in whole or in part. Such programs have worked well in previous recessions and have shown strong uptake in the current crisis.

The global economy and the international community may look completely different after Covid-19

Every major crisis represents an inflection point, and the global economic shock of COVID-19 cannot be excluded from this rule. However, the development of alternative scenarios and the possibilities associated with them is very important.

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