The combined insurance protection gap for mortality, health and natural disaster risks is estimated to reach a "new high" of $1.24 trillion in 2020, according to Swiss Re AG.
Globally, mortality resilience declined the most, mainly due to a widening of the mortality protection gap in the Asia-Pacific region, where China's protection gap broadened due to "rapidly growing" household debt. Health resilience was stable despite some deterioration in emerging markets. The global health protection gap grew by over 5% to $588 billion.
Natural catastrophe resilience was lowest of the three risk areas, Swiss Re said, with health and mortality protection gaps expected to widen as households struggle with lower incomes, higher healthcare costs and the financial consequences of losing a breadwinner due to the pandemic.
"The widening global protection gap is a huge opportunity for insurers to fulfill their mandate as risk absorbers and improve societal resilience," Jerome Jean Haegeli, group chief economist at Swiss Re, said.
Additionally, COVID-19 is expected to weaken world economic resilience by nearly 20% in 2020, compared to the prior year, with the U.K., U.S. and Japan experiencing the greatest falls in resilience among major economies, according to Swiss Re's resilience indexes.
Switzerland, Finland and Canada are the world's three most resilient countries, reflecting their "comprehensive economic strength" against future crises. China's resilience will likely remain relatively unchanged, since it reopened its economy earlier than many others.
Although stimulus packages have cushioned the blow to the global economy, they have depleted many countries' fiscal and monetary reserves, causing their resilience scores to fall. Monetary policy buffers will be largely exhausted in most advanced economies, leaving fiscal headroom as the major determinant of resilience, Swiss Re noted.