2022 Upside, Downside Risks: The Insurance Industry Experience

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The global economic performance from the lens of the World Bank indicates an average growth of 4.1%, down by 0.2% from the previous projection. United Nations Organization (UNO) warned that global economic recovery is losing steam due to multi-faceted economic headwind amidst new wave of Covid-19 infection, persistent labour market challenges, supply chain hiccups (Culled from United Nations World Economic Situation and Prospects (WESP) 2022).

According to the Secretary General of UNO, all nations require co-ordinated policy and financial measures at the national and international levels, hence the time is now to close the inequality gap within and among countries. The year 2021 experienced robust recovery driven by increased consumer spending and up-ticked investment. However, growth momentum in countries like the United States of America (USA), China and in the European Union slowed down towards the end of the 2021 4th Quarter.

Fast forward to 2023, the UNO projected a growth rate of 3.5%. Global economic balance is expected to tilt significantly between now and 2050. There is no doubt that changes will be witnessed in the following areas of humanity: population growth, breaking of new frontiers in technologies, changing climate, renewable energy and sustainability. By 2050, following projections by analysts, the world population is expected to increase by 6.6 billion or roughly 68% of humanity. At the home front, the economy is projected by the World Bank to grow by 2.5% up from an estimate of 2.4% in 2021. We expect an uptick in activity in the service sector. Possible delay in the release of funds at the macro level may create a bump with most of the average folks found at the micro levels operating SMES.

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The government will, most likely, come up with welfare-linked initiatives to ease the burden of economics lowdown on the common man. Year 2022 will experience a frenzy of activities as electioneering preparations resume ahead of the electoral year 2023. Increased consumer spending would impact on insurance services as major insurance players in the market are deploying technology to meet the changing expectations of today’s customer. Insurance operators need to prepare adequately for the insurance consumers of the future with new customer experience expected. Climate changes and a host of other environmental developments will continue to define the way we do our business beyond the brick and mortar method.

Climate and sustainability issues with the attendant huge impact on companies’ balance sheets are a major concern which organizations should strategize and address frontally. The tenacity and audacity with which organizations navigate the envisaged downside risks will determine their level of performance and profitability on the long term.

The year promises to unleash surprises, especially in the area of breaking new frontiers in technological innovations, new product development and better method of reporting companies’ financials. The eventual implementation of the IFRS 17 in 2023 will be the most defining threshold on the disclosures of organizations’ information and general accountability to both internal and external stakeholders.

Despite the perceived challenges highlighted above, progress can be achieved with resilience buoyed by hope of a better future.

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