The global economy finds itself in a state of uncertainty in the face of the novel coronavirus (COVID-19), with S&P Global now forecasting a global recession this year, according to a briefing from Guy Carpenter-affiliate Marsh. (1)
In the past three months, there has been an evolution of the oil price war between Saudi Arabia and Russia (2), the S&P 500 index of U.S. companies evidenced a maximum peak to trough variance of 33.9 percent (3) and Chinese industrial production dropped by 13.5 percent (4) — all collectively highlighting the breadth of the outbreak’s impact.
Combining these macroeconomic factors with the fact that in the United Kingdom 45 percent of businesses reported lower than expected turnovers (likely through a distinct lack of consumer expenditure) means that many organizations are very likely entering a period of severely restricted free cash flows. (5)
In such uncertain times, organizations may face an unenviable set of conflicting factors: risk appetite is reducing, but the need to control external costs is vital — all whilst a transitioning insurance market introduces unfamiliar volatility into any cost-benefit analysis. In this dynamic risk environment, how can organizations equip themselves to make the most capital-efficient use of insurance?
1. S&P Global.
3. 19 February 2020 (3,386.15) to 23 March 2020 (2,237.40).
4. National Bureau of Statistics for China.
5. Office for National Statistics.