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Global economic stagnation: The role of insurance

Building resilience against economic stagnation

Global economic stagnation

Protecting against economic risks

Insurance acts as society’s financial safety net, providing a backstop against financial loss for countless risks worldwide and providing guidance and expertise to help customers understand their vulnerabilities and strengthen their resilience. Organisations that implement a comprehensive risk management assessment and strategy, in partnership with their brokers and insurers, are more likely to be in a better position to navigate the turbulence of an economic stagnation.

Insurance also has a significant role to play in protecting businesses from the many secondary impacts that can arise during periods of economic uncertainty. Whilst the full impact of a systemic event would be too great for any single sector to bear, insurance can work alongside private and public sector partners to protect against risks that could be heightened during periods of economic slowdown, such as:

Trade credit

Trade credit insurance covers a business for losses arising from the failure of debtors to pay their debts and today protects over $3 trillion of global trade[1]. Policies are available to protect customers who could suffer defaults on invoices for goods received as consumer spending drops and inventory remains unsold. In the wake of the economic fallout from the COVID-19 pandemic, the insurance industry partnered with the UK Government to implement a Trade Credit Reinsurance Scheme to ensure that insurance coverage and credit limits could be maintained, helping businesses to trade with confidence.

Strikes, riots and civil commotion

Long-term economic challenges could lead to civil unrest such as strikes, riots or civil commotion, with businesses potentially facing significant losses caused by damage to property and inventory or business interruption. Under already pressured economic climate, the loss of revenue in the aftermath of an event could challenge businesses with immediate and long-term impacts.

Political risk

Businesses, particularly those operating in countries more prone to civil unrest, may give increased emphasis to the consideration of political risk (PR) and political violence (PV) programs.  Over 60 insurers, mainly in the US, UK, and Bermuda, supply this cover, with a total market capacity of $3.7 billion. Solutions could extend beyond risk transfer, with insurers and brokers also able to help organisations develop contingency plans in case of civil unrest.

Mergers & Acquisitions

In times of economic downturn, insolvency, restructuring and distressed acquisitions can play a more significant role in the M&A market. M&A insurance, in particular transaction liability coverages, can create value for sellers and buyers and unlock deals in these situations, for example where a distressed seller is unable to provide warranties or indemnities.


Economic pressures can lead to a heightened cyber risk landscape, for example due to a rise in criminal actors, an increase in social vulnerability, or cost-cutting efforts undermining organisational cybersecurity. The FBI reported a 22.3% increase in online crime during the recession in 2008-09[2]. The insurance industry has an essential role in enabling greater cyber resilience, helping us all to better understand, prepare for and mitigate cyber risk. At Lloyd’s there are more than 77 expert cyber risk insurers concentrated in one place, offering relevant and tailored solutions for customers at risk from cyber attacks. We issued the first ever cyber policy in 1999, and today write around one fifth of global cyber insurance.

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Facing into a braver future

Risk – and insurance – matters the most in times of uncertainty. Our products and expertise help people and businesses manage uncertainty and make bolder decisions through those periods, so what we do today is more important than ever. While a stagnation could persist for some time, insurers with a strong focus on their customers are likely to be best placed to maintain their relevance:

Demonstrate value: Insurance is often considered a discretionary purchase. Customers’ insurance budgets could be significantly squeezed as buyers seek to either reduce coverage to the minimum or obtain it as cheaply as possible. In this climate it will be vital for the insurance industry to demonstrate its value and encourage customers to maintain relevant and valuable insurance coverage to protect themselves against the growing range of risks they will encounter following an economic stagnation.

Provide expert advice: Insurers, brokers and risk management service providers have a unique opportunity to help businesses understand and manage potential exposures which could be exacerbated by an economic stagnation.

Collaboration: The insurance industry has a vital role to play to help all stakeholders understand the existing support available from the insurance industry and where new specialist coverage or partnerships could help to address heightened risks.

The government perspective

The government is a nation’s primary source of help during a period of stagnation. However, if its resources are already depleted from prior crisis management, it may struggle to provide the financial stimulus needed, potentially plunging the country into a longer period of stagnation and towards recession.

Monetary and fiscal policies

Interest rate management is most useful in a short term, non-global scenario, where national interest rates can be used to stimulate investment. Usually working with a central bank, the government can increase money supply through qualitative easing, stimulating lending and investment. Stimulus funds may also be used to boost consumer spending.

Structural reform

In a long-term or global stagnation, the above measures may be insufficient. To kickstart productivity and consumer demand, governments may want to reduce or remove barriers to business, including providing funding for start-ups, relaxing regulation or stimulating job creation. These are long-term policies that often need to work in tandem with similar initiatives in other major developed nations to have the greatest impact.

Explore the impact of economic stagnation

The scenario narrative

Understand how these events could take place

The economic impact

How vulnerable could the global economy be?

Additional insight from the scenario

Dig a little deeper into some of the insight from this scenario.


This report has been produced by Lloyd's Futureset and Cambridge Centre for Risk Studies for general information purposes only. 

While care has been taken in gathering the data and preparing the report Lloyd's and Cambridge Centre for Risk Studies do not, severally or jointly, make any representations or warranties on behalf of themselves or others as to its accuracy or completeness and expressly exclude to the maximum extent permitted by law all those that might otherwise be implied.

Lloyd's and Cambridge Centre for Risk Studies accept no responsibility or liability for any loss or damage of any nature occasioned to any person as a result of acting or refraining from acting as a result of, or in reliance on, any statement, fact, figure or expression of opinion or belief contained in this report. This report does not constitute advice of any kind.

Note that this report does not seek to replace or inform any of the mandatory scenarios which Lloyd’s publishes to support the Realistic Disaster Scenario exercises managing agents are required to undertake in respect of the syndicates managed by them.