Where were you when the world changed?
Moses Ojeisekhoba, CEO for reinsurance at Swiss Re, sets the scene for this year’s Rendez-Vous in Monte Carlo.
The pandemic and Ukraine invasion have accelerated the transition to a multipolar world order, with a few large powers creating something distinct from the unipolar system that emerged from the Cold War. The dimensions of the shift may be open to debate, but it’s clear the current system is moving rapidly to something new. (Re)insurers are partnering with clients and society to shape and stabilise this new era, as supply chain, climate and food and energy security risks grow more complex.
Peeling back the layers of human history, we see patterns that observers likely missed in the moment. For instance, the Sumerians and Egyptians who began drafting the first written records 5,000 years ago may not have immediately grasped the revolution they were unleashing. There probably wasn’t somebody standing there by the Nile saying, “I was there when the world changed.”
Even so, time and perspective have taught us how this marked the juncture when humankind emerged from its pre-historic darkness, clearing the way for the rapid development of religion, education, philosophy, science, law – in short, the foundations of modern civilisation. Nothing would ever be the same again.
As we gather at Rendez-Vous in Monte Carlo this month, we have landed in front-row seats to another, critical turning point for civilisation: The transition from a unipolar to a multipolar world order. In Swiss Re’s latest sigma publication, entitled “Maintaining resilience: the role of P&C insurers in a new world order”, our experts document forces shaping this new paradigm. In the making for some time, this shift has been catalysed by both the pandemic and war in Ukraine.
This new order is a more fragmented construct than what followed World War II. The dominant system of governance and cooperation is unravelling, probably irreversibly, posing challenges to the multilateralism we once counted on to promote global stability. Power centres such as China, Europe, India and the US are set to redefine multilateralism, not exactly abandoning cooperation, but instead pursuing relationships more strongly defined by their individual interests.
Amid this sea change, we see a role for P&C (re)insurers, to facilitate as orderly a transition as possible. More than ever, our industry must step forward as an agent of societal resilience.
Among the first significant new order features to emerge from the pandemic and Ukraine invasion is the realignment of supply chains to avoid future crisis-driven trade disruptions. Some describe this as a retreat from globalisation, or a deceleration. Regardless of how you define it, re-shored or “friend-shored” supply chains will no longer be based on pure efficiency, as assurances that supply chains are resilient enough to withstand crises are also paramount.
This rebooted system, with relocated facilities running in parallel, will require insurance solutions to smooth how business is conducted. Companies must increasingly harness data to overcome the heightened complexity that will now accompany getting products from factories to customers, and insurance solutions will be critical in enabling this transition.
The shift to a green economy was already unavoidable, to mitigate climate change’s existential threat. Russia’s invasion of Ukraine has only heightened urgency, as leaders fret over energy security. Such a transition extends far beyond renewable energy, as virtually every element of the global economy requires reconfiguration in order to meet climate goals. I’d argue that this is where the (re)insurance industry can really shine, by helping de-risk this shift for our stakeholder clients and by simultaneously deploying our own financial muscle to actively participate in the financing of new climate-friendly infrastructure.
Think multipolar, act globally
One thing all of us at the Rendez-Vous know instinctively is that the push to combat climate change transcends borders. Climate change and the extreme weather events it fuels care nothing about particular geopolitical interests. That’s why multilateral action remains indispensable even in a world order characterised by large players serving narrower interests. No less than the planet’s future is in the offing. Here, (re)insurers’ solutions to bolster climate resilience can be the glue keeping a fragmented world from splintering further.
A third defining feature of this emerging order dominated by multi-polar blocs of economic influence is the potential for worsening disruptions to food supplies, a scenario that would accelerate widening inequality. Food prices were rising before Russia’s invasion of Ukraine; the invasion poured fuel on the fire. The most vulnerable are hurting most. Large swathes of Africa and south Asia face acute hunger while the United Nations says the number of people just a stumble away from famine has more than doubled since 2019 to 345 million; many are children. This is devastating.
This problem is multi-faceted, given so much is currently out of whack, from energy costs, fertiliser and grain supplies to climate-driven drought and the challenges inherent to feeding a growing population.
That’s why agriculture insurance, from parametric drought solutions to products that smooth out volatile production costs, is expected to assume a more important role in managing growing risks stemming from a multipolar world order’s impact on the food-production value chain. Public-private partnerships involving the insurance industry will also be essential, to boost protection in markets that historically have been underserved.
When the world changed
As provocative as this may sound, civilisation finds itself at another pivotal turning point, as a new multipolar world order takes shape.
While it may have taken humankind centuries to put previous shifts – including the one ignited by written communication, to return to my initial example – into their revolutionary place, technology now at our fingertips makes it possible to quickly assess, understand and respond in real time to the new order taking shape this time.
This is what I call data-driven risk knowledge. As (re)insurers, it gives us the power to be the architects of our destinies, not merely passive observers of events. When we recall this moment in history, I’m optimistic we’ll be able to say that when the world changed in 2022, our industry was there not just to maintain resilience, but to strengthen it.