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Swiss Re Sees $408 Billion Mortality Protection Gap

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What You Need to Know

  • The reinsurer says only about 46% of world households have the resources to maintain living standards if the primary breadwinner dies.
  • The North American mortality gap stands at $65 billion.
  • About 55% of North American households can handle the loss of the primary breadwinner's income.

The COVID-19 pandemic made the entire world economy more brittle in 2020, and one factor was an increase in the life insurance protection gap, according to a Swiss Re Institute report.

Institute economists calculate the life insurance protection gap when they’re creating annual Macroeconomic Resilience Index figures for individual countries and the world.

The gap between the amount of life insurance, savings and other mortality-protection resources households have and the mortality-protection resources those households need increased only slightly in North America in 2020, to $65 billion, from $64 billion in 2019.

But the world life insurance protection gap increased to $408 billion, from $385 billion.

The Macroeconomic Resilience Index, or financial stability index,  fell to 0.44 in 2020, from 0.62 in 2019.

The U.S. resilience index fell to 0.55, from 0.80.

The resilience index includes many factors in addition to mortality protection adequacy, such as financial market development and human capital factors.

More on this topic

Elsewhere in the report, the institution economists say:

  • Only 46% of the households in the world have enough life insurance and other resources to maintain family members’ standard of living if the primary breadwinner dies.
  • About 55% of households in North America have enough resources to maintain the survivors’ standard of living if the primary breadwinner dies.
  • The North American natural catastrophe resilience index has increased slightly, to 40, from 39.8.

The institute economists say governments have done about all that they can do to strengthen the world economy by holding down interest rates and borrowing money to fund government spending programs.

“The focus must turn to structural reforms,” the economists write. “This should include targeted investments into sustainable and quality infrastructure, the digital economy and the transition to a low-carbon economy.”

Why It Matters

The institute’s views matter, because Swiss Re has a record of having a good crystal ball.

A Swiss Re student team shocked the world in 2016 by predicting that a pandemic comparable to the 1918 influenza pandemic would cause more than $4 trillion in economic losses.

The official COVID-19 death toll now standards at about 3.8 million, or about 8% of the 1918 pandemic death toll, and the World Health Organization director general, Tedros Ghebreyesus, has estimated that the pandemic has caused $22 trillion in economic losses.

(Photo: NASA)