Macroeconomic issues, which affect the insurance industry, were highlighted on Tuesday, September 26, the third and final day of FIDES Rio 2023, the sector’s largest conference in the Western Hemisphere. One of the main attractions was Nobel Prize-winning economist Paul Krugman. In his speech, he noted that inflation caused by the economic impact of the pandemic has been falling consistently in the United States and Europe, while interest rates remain persistently high in these regions.
According to Krugman, there is a reason for this: higher interest rates have not caused an economic recession and rising unemployment in developed countries, making it hard to justify lowering them.
“As the economy strengthens amid high interest rates, people are losing faith that they will return to pre-pandemic levels. The effects of the increase in interest rates haven’t fully taken hold yet. It’s possible that the economy will weaken and rates will then fall again,” said Krugman, a New York Times columnist, one of the 50 most influential people in global finance according to a Bloomberg ranking and the winner of the 2008 Nobel Prize in economics.
“Protection gap” for climate risks and possible responses
The future direction of macroeconomic indicators, such as inflation and interest rates, are important factors to consider when building and managing businesses. These factors can also influence the demand for insurance.
Other topics of interest to the insurance industry were also addressed. For example, how can we reduce the “protection gap” between insured and uninsured climate-related losses, which is 60% on average globally and more than 80% in Latin America? The Insurance Global Trends panel at FIDES Rio 2023 set out to answer this and other questions.
As well as the protection gap and the severity of climate damage, the panel explored some other challenges facing the insurance industry, including the impacts of the demographic transition and its effects on health (such as higher spending) and pension systems.
Possible solutions mentioned during the panel discussion include: i) investment in technology, especially involving the use of data and artificial intelligence; ii) diversification and greater customization of products; and iii) the need for financial education in order to make the insurance market better understood among larger portions of the world’s population. Representatives of Universal Health Monitor (André Medici), Munich Re (Clarisse Kopff), IRB Re (Daniel Castillo), EY (Isabelle Santenac), the Bradesco group (Ivan Luiz Gontijo Jr.) and AON (Jeremy Goodman) took part in the panel.