The global recession caused by the COVID pandemic and the human cost of the virus threatens to put generations at odds but cannot derail efforts to transition to a more sustainable economy and a low-carbon future.
Swiss Re has issued its SONAR on the pandemic, which found intergenerational tensions, supply chain disruptions and the fragility of public healthcare are among the risks and trends amplified by COVID-19.
It added the recession caused by the containment measures to curb the coronavirus outbreak is exacerbating longer-term structural problems, such as an increased pressure on intergenerational social contracts and disruptions to supply chains.
“While older generations turned out to be more vulnerable in the pandemic, millennials struggle with high unemployment and debt from education spending – putting to test the solidarity between generations,” it warned. “Measures such as the widespread lockdowns are causing drug shortages among other supply chain problems, and at the same time, the COVID-19 crisis is exposing the fragility of many of the world’s public health systems and the need for better risk management.”
“After this global crisis, which shows the importance of forward-looking risk management, society will need to adapt to many changes, some of which will continue to linger on,” said Patrick Raaflaub, (pic) Swiss Re’s Group Chief Risk Officer. “As a risk knowledge company, it is our duty to raise awareness about new risks we pick up on the horizon and to continue to build resilience also in these unprecedented times.”
The report added the pandemic will continue to prompt shifts in the political landscape, regulatory environment and in market dynamics. It will also bring about a refocus in priorities, as the world moves toward planning its economic recovery.
“The COVID-19 containment measures and lockdowns may have eased pollution for a brief moment, but they will not put a halt to global warming,” the report said. “Therefore, the transition to a net-zero economy, where sustainability is firmly embedded in economic recovery strategies, is key.”
The reinsurer said once the world moves out of crisis stage and toward some form of post-pandemic norm, the public and private sectors must focus on both global health and climate change. A transition to a low carbon economy presents many opportunities, but also new risks for the insurance industry, including from carbon removal schemes.
“As a starting point, all sectors of the economy need to limit and reduce emissions as much as possible, in particular the transport, agriculture and building industries,” added the report. “Greenhouse gases that remain need to be removed from the atmosphere through biological or technical means and then be permanently stored.”
According to most climate models, lower greenhouse gas (GHG) emissions together with decisive carbon removal are needed to limit global warming to well below 2°C from pre-industrial levels. To reach that target, the carbon removal industry would need to grow to the size of the current oil & gas industry by 2050, according the report. While the carbon removal industry is still in its infancy and its scalability is yet to be proven, the estimated growth would bring a wealth of opportunities for insurance.
“The transition to a low-carbon economy requires political, technological and behavioural change,” said Swiss Re. “Finding new ways to cope with the required changes calls for innovation and offers new opportunities for business across different sectors, and in all core areas of insurance, including in risk knowledge and risk transfer as well as investment. The insurance industry can play a pivotal role by providing specialist risk transfer knowledge and capacity to partners in other sectors of the economy.”