Understanding the interplay among social, economic, and environmental crises is key to understanding their impacts on the insurance industry and is therefore the key to developing innovative responses that will promote the long-term steady growth of the insurance industry.

There are four common features important to the interplay among these three crises. First, the crises are increasing in frequency. Due to global climatic change, natural calamities and extreme weather have increased; the development of a truly global economy and financial industry means that the causes of economic crises are becoming more complex and diversified; developing countries are undergoing economic and social transformation enhancing the risk of a crisis; the development of the Internet links economic and social transformation around the world enhancing the spread of any one of these crises. Second, the crises are spreading faster and faster. The spread of crises are fuelled by information dissemination. The popularization of the Internet and communication technology not only has increased the reach of social crises but also has been the ‘catalyst’ of crises.

The third feature is, the reciprocal effects of these crises. Specifically these effects are of greater consequence than ever before. The interface between social movements and markets is increasing, and as a result conflicts that arise between the two are more consequential. Additionally the environment is an area, in which social movements and markets are often in conflict e.g. Water Crisis influences the Geopolitics, the need for oil in emerging economies has played a role in the US election via the Keystone XL pipeline largely due to environmental concerns. Finally, the amount of monetary losses caused by these crises is growing. The amplification of crises frequency and interaction as well as the value promotion of the Single Risk Standard, have all resulted in rising monetary losses.

Now let’s turn our attention to analysing the impact of these crises on the insurance industry. Economic crises can lead to huge financial losses in short periods of time and have a profound impact on consumer confidence resulting in long term effects such as economic recession. For instance in China, the impacts of economic crises can be felt at three levels: from the micro perspective, the consumer confidence is shaken; from the medium level of view, the economic crisis has caused a lot of pressure on insurance investment; from the macro-level of view, it has resulted in challenges for  insurance regulation, specifically: how to understand the influences of globalization from dialectical perspective; how to assess the reality that the insurance business is getting more complex from dynamic perspective; how to understand the priority of insurance regulation from systematic perspective.

Environmental crises can directly lead to large amount of insurance indemnity, however, it can have positive impacts on the insurance industry as well. It improves the financial stability of the original insurance company by stimulating the company to employ risk diversification through reinsurance. For developed countries, it can facilitate cooperation between the insurance industry and insurance regulators, so as to further propel the transformation of the insurance regulatory laws and institutions. For developing countries, the frequent occurrences of environmental crises are conducive to enhancing people’s insurance awareness, especially the awareness of the Catastrophe Insurance and Environmental Liability Insurance, and it helps promote the specialization of the insurance operators.

Social crises also have important impacts on the insurance industry. They influence demand for the insurance products such as export credit insurance because social unrest and other social changes may limit the potential profitability of trade and investment. Similarly they can drive the push for domestic social insurance. An overarching goal of government is to promote social stability and domestic social insurance plays a key role in promoting this goal.

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