Protect the future

Today’s world is one of increasing uncertainty. Uneven development progress, intensifying inequality, escalating political polarization, and climate-induced hazards are the main reasons for that. In this context, global interdependence is being reconfigured, and defining a path forward where multilateralism plays a pivotal role is of the utmost importance. That is the focus of the latest Human Development Report “Breaking the Gridlock: Reimagining cooperation in a polarized world”, presented on March 18th in Venice at the Procuratie Vecchie - the home of Generali’s foundation The Human Safety Net. The launch came as part of the multi-year partnership between Generali and the Insurance and Risk Finance Facility of UNDP, the United Nations Development Programme, designed to reduce the protection gap for vulnerable communities world-wide through access to innovative insurance and risk finance solutions.

The 2023/2024 Human Development Report highlights that the rebound in the global Human Development Index (HDI) – which reflects a country’s Gross National Income (GNI) per capita, education, and life expectancy – has been partial, incomplete, and unequal, with a widening gap between the richest and poorest countries since 2020. Despite being now projected to reach a new high, the global HDI value would still be below trend compared to pre-2019 values.

The global figure also masks disturbing divergence across countries: every OECD country is projected to have recovered, but only about half of the Least Developed Countries are projected to have done so. After 20 years of steady progress, inequality between countries at the upper and lower ends of the HDI has reversed course, ticking up each year since 2020. If the global HDI value continues to evolve below the pre-2019 trend, as it has since 2020, losses will be permanent.

Meanwhile, international collective action to address shared challenges such as increasing inequality, climate change, peace, and security is hindered by political polarisation, distrust, and a sense of powerlessness. This fuels inward-turning policy approaches – starkly at odds with the global cooperation needed to address urgent issues like the decarbonization of economies, misuse of digital technologies, and conflict.

Suffice it to consider that, while 9 in 10 people show unwavering support for the ideal of democracy, there has been an increase in those supporting leaders who may undermine it: today, for the first time ever, more than half the global population supports such leaders. Political polarisation is thus poisoning practically everything it touches, impeding international cooperation, as are misperceptions about other people’s preferences and motivations.

All too often, in fact, people make biased assumptions about others, including those on the other side of political divides, while actually agreeing with one another more than they think. For example, while 69 percent of people around the world report being willing to sacrifice some of their income to contribute to climate change mitigation, only 43 percent perceive others believing the same (a 26-per-centage point misperception gap). The result is a false social reality of pluralistic ignorance where incorrect beliefs about others hamstrings cooperation that, if recognized and corrected, could help build collective action on climate.

To sum up, we stand at an unfortunate crossroad: one characterized by insecurity, inequalities, and disempowering narratives that engender defensive fatalism and catastrophic inertia - all circumscribed and, in some sense fuelled by, dizzying political polarization.

However, there is a way out: it consists, on the one hand, in pushing back on political polarization by providing global public goods and enhancing people’s voices in deliberation and tackling misinformation; and, on the other hand, in promoting international cooperation, greater equity in harnessing new technologies for equitable human development, and new and expanded financial mechanisms to support development.

PLANET UNDER PRESSURE

Frequency and nature of extreme events in Europe

The frequency of catastrophic events has increased and in Europe, Greece and Italy are competing for an unwanted record.

A particularly important role in this direction can be played by public-private partnerships: such strategic alliances can empower investors and investment service providers to cultivate fertile ground for innovative investment solutions, identify policy enablers, and call for the changes needed. As financial protection, business development, and human rights all go hand in hand, private and public institutions can greatly contribute to comprehensive solutions for the most pressing socio-economic and climate-related issues of our time.

This is also true for the insurance industry: while the private insurance sector can provide extensive expertise in prompt loss assessment and pay-outs, as well as risk management and mitigation solutions, public authorities can improve the legal framework and act as a reinsurer of last resort. That’s why developing insurance and risk finance solutions that can be accessible for the people who need them the most is so important – and it stands precisely as the centrepiece of the partnership between Generali and UNDP to enhance the resilience of communities and local businesses.

Insurance can in fact provide an essential stabilising force in the face of uncertainty and contribute to reducing the protection gap for vulnerable communities worldwide, focusing on innovation and the modernisation of services, for businesses to grow securely and for people to deal more effectively with the current context of instability.

That is why “Protect the future” – which sums up the goal shared by Generali and UNDP - is about offering a transformative path to human development, leveraging insurers’ understanding of risk to help organisations and countries mitigate and adapt, thus protecting a greater share of the global economy and leading to stronger and more resilient societies.

To this end, protecting the future is also about supporting a sector that represents a key driver of growth, development, and innovation: that of small and medium-sized enterprises (SMEs).

These businesses remain in fact most vulnerable to shocks, whether from natural disasters exacerbated by climate change, geopolitical tensions, or other disruptions to the manufacturing or logistics continuum – and less than 5% has any form of insurance, which makes them particularly exposed to risk. Hence the importance of promoting a culture of sustainability among SMEs and ensuring their financial resilience, which are the goals at the heart of Generali’s SME EnterPRIZE initiative to support SMEs in their transition to socially and environmentally sustainable business models.

Building on the engagement carried out with thousands of SMEs from across Europe over the past years, the SME EnterPRIZE project has expanded in Asia in the framework of the event organized in Kuala Lumpur by Generali and UNDP to present concrete solutions on how to boost SME resilience against climate change and other risks. One such tools is the ‘SME Loss Prevention Framework’², a digital platform to raise the readiness and awareness of SMEs to the risks facing vulnerable communities, starting in Malaysia with the flood risk.

As part of the Generali-UNDP partnership and exploring innovative alternatives to reduce the protection gap, a joint framework on parametric insurance³ was also issued. Unlike traditional insurance, which requires a loss to occur, parametric solutions offer pre-specified payouts based upon a trigger event such as natural hazards (wind speed, too much or too little rainfall, earthquake intensity), disruptions in agriculture or renewable energy yield, and more. As a solution that offers cost-effective, efficient risk transfer mechanisms, and protection from natural disasters, parametric insurance provides an ex-ante solution that can reduce the financial burden of climate, demographic, and economic changes, leading to greater resilience for governments, financial institutions, businesses and households, and unleashing productivity and investment.

With developing nations facing a significant shortfall in the capital they need to build resilience and to support a low-carbon transition in their economies, innovative insurance solutions and public-private partnerships are important tools for mobilising greater private capital into these markets and meeting the needs of climate-vulnerable people.

Because global insecurity demands a collective approach and a long-term perspective: challenges related to climate change, political polarization, and technological advancement are interconnected and need coordinated responses. As a leading insurance and asset management provider that has fully embedded sustainability into all strategic choices, Generali can contribute in several ways; but only through cooperation and more people-centred, co-owned, and future-oriented institutions can we tackle insecurity and build a safer, more sustainable future.