Geopolitical trends killing off disinflation hopes: Swiss Re
The cards are stacked against disinflation for the longer-term, with additional pressures adding costs specifically within the risk-sharing industry, Swiss Re CEO Christian Mumenthaler said Wednesday (November 29).
The rise in geopolitical uncertainty continues to keep the would-be easy efficiencies out of the global pricing equation, he argued for a panel at the annual conference of the Geneva Association.
“I think inflation is higher for longer,” Mumenthaler told conference delegates.
Mumenthaler traces the lead cause to the rise in geopolitical tension, creating increasingly protectionist policy, a trend he indicates has been running much longer than the latest global conflicts.
“If everything is rerouting, not with efficiency in mind, but with safety and security,” Mumenthaler said of the decline of globalisation, “... then everything will be more expensive.”
The global “decline of trust” is “clearly the stronger force right now” with “separations being created everywhere,” he said.
That protectionism is killing more than global supply chains as a source of low cost production. The reinsurance industry is suffering directly as the nation's turn protectionist on sourcing capital and onshoring profits.
“As we get into this more split world, you see more and more barriers put up against risk transfer,” Mumenthaler said. “Efficiencies will go down and prices will go up.”
The energy transformation is a “massive” cost waiting on top of the ongoing loss in economic efficiencies, Mumenthaler added.
He expects “double or triple digit billions invested across value chains” in the process, with the move to clamp down on Scope-Three emission impacts still waiting to pack the biggest inflationary punch.
Swiss Re has been banging the drum on inflation threats throughout 2023. In multiple media, the message has been to pack in extra rate, if not for the risk of inflation, tyhen for the seemingly countless raw uncertainties amongst its many drivers. Inflation will hold above central banker targets through 2024, the group's economic think tank has last said.
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