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Business leaders, including insurers, still think economic issues such as inflation and rising interest rates will be the dominant threat going into 2024. The current "low-growth, low-investment and low-cooperation era", they said, "undermines resilience and the ability to manage future shocks".
“An economic downturn ranked as the most cited risk by G20 business leaders
this year and was identified as the top risk in 13 of the G20 countries.”
This analysis comes from new World Economic Forum (WEF) data on how economic and societal threats – such as an economic downturn, inflation, and an erosion of social cohesion – rank among the biggest risks in G20 countries over the next two years. It is based on a survey of business leaders, which builds on the Global Risks Report released at the beginning of this year.
“An economic downturn ranked as the most commonly cited risk by G20 business leaders this year and was identified as the top risk in 13 of the G20 countries,” said a statement from Mercer on the findings. Marsh McLennan and Zurich Insurance Group are partners of the World Economic Forum’s Centre for the New Economy and Society and the Global Risks Report series, which conducted the research.
The results could be crucial for investment teams at insurers as they watch how the market reacts as well as how this market sentiment affects appetite for some investment classes.
Fears of economic issues mentioned in the WEF report remain despite most insurers believing that the Federal Reserve, Bank of England (BoE), and European Central Bank will begin to ease on the flurry of interest rate rises the market has seen since the beginning of 2022.
Inflation has also begun to fall over the course of 223 in most developed countries. The UK’s October 2023 inflation rate was 4.6%, down from 6.7% in September, with the BoE saying it’ll be the end of 2025 before levels are back to ‘normal’.
“Inflation, labour shortages, energy supply shortages, and an erosion of social
cohesion were identified among the top five risks to G20 countries.”
The WEF Executive Opinion Survey gathered the views of more than 11,000 business leaders from over 110 countries between April and August 2023. According to the findings, this year’s survey highlights how, even before the current conflict in the Middle East, increasingly intertwined economic and societal risks were perceived as the biggest concerns in G20 countries against a backdrop of escalating global political tensions and persistent inflationary environments in many major economies.
“Inflation, labour and/or talent shortages, energy supply shortages, and an erosion of social cohesion and wellbeing were also identified among the top five risks to G20 countries in the near term,” said Mercer on the findings. “The findings highlight strikingly common concerns between advanced economies and emerging markets," they added.
An “economic downturn” was ranked as the top risk across all regions, while “extreme weather events” was the only environmental risk to make the top 10 this year across all of the high income, upper middle income, lower middle income, and low-income country groups.
At the same time, broker WTW also found insurance industry leaders from across Europe saw high inflation and interest rates as issues with the greatest impact on their organisations’ ability to secure future revenue growth in 2024.
“Insurance companies expect tough and volatile macroeconomic conditions
will have a major impact on growth and margins in 2024.”
The poll of 75 ‘insurance leaders’ from 45 companies was conducted in October was conducted at WTW’s European Insurance Leaders’ Forum in Brussels. Inflation and interest rate volatility was ranked by respondents as the most significant barrier to securing future revenue growth in 2024 (25%), closely followed by attracting and retaining talent (24%) and digital transformation (20%).
“Insurance companies expect tough and volatile macroeconomic conditions will have a major impact on growth and margins in 2024,” said Tammy Richardson, European Regional Leader, Insurance Consulting and Technology at WTW.
“The ongoing turbulent geopolitical landscape was viewed as a less significant threat with only 15% of insurers reporting this as a barrier to revenue growth in 2024,” said the survey results. “Regulation (13%) also did not feature as prominently as a short-term risk over the next 12 months relative to other global risks.”
Whether market jitters due to further financial issues in 2024 persist or not will deeply affect the ways insurance investment teams look for new deals and yield in 2024.
