Preserving and Expanding the Role of Insurance in a Fragmented Global Economy: Insights for Actuaries

By Kai-Uwe Schanz and Carlos Arocha

International News, July 2025

The Geneva Association[1] recently published a report titled “Insurance in a Fragmented World Economy,”[2] offering an in-depth analysis of how geoeconomic fragmentation—driven by political shifts, economic nationalism, and international tensions—is reshaping the global economic landscape.

This shift presents both challenges and opportunities for the insurance industry, which is of significant interest to actuaries involved in risk management and pricing, and reserving. The increasing fragmentation of global markets and the rise of economic nationalism are altering the risk environment in ways that actuaries must understand to properly assess and mitigate new risks.

This article summarizes the key findings of the above report while offering insights into how these shifts can impact actuarial practice. It will emphasize implications for risk management, the pricing of insurance products, investment strategies, and long-term forecasting—all areas in which actuaries play a critical role.

Introduction to Geoeconomic Fragmentation

The global economy has experienced a significant shift from the trend of increasing integration and free trade that dominated the latter half of the 20th century. This period of globalization, which saw increasing cross-border trade, capital flows, and supply chains, began to stagnate following the 2008 financial crisis and has been exacerbated by subsequent geopolitical events, such as the US-China trade war, the COVID-19 pandemic, and the Russia-Ukraine conflict. These events have ushered in an era of slowbalisation—a slowing of the pace of global integration—leading to what the report identifies as geoeconomic fragmentation.

Geoeconomic fragmentation refers to a policy-driven reversal of global economic integration. Nations are now increasingly prioritizing national security and economic resilience over the efficiencies provided by free trade and open markets. This shift has profound implications for insurers, actuaries, and risk managers who must adapt their strategies to address these new complexities. For actuaries working within the realms of insurance and financial reporting, understanding these shifts is essential for both accurate risk pricing and managing long-term liabilities.

Economic Manifestations of Geoeconomic Fragmentation

Geoeconomic fragmentation has several key economic manifestations that impact actuarial work:

1. Trade Restrictions: The imposition of tariffs and the rise of protectionist measures have disrupted global trade, particularly between major economic powers like the US and China. This has resulted in inefficiencies in production, higher costs for consumers, and altered risk profiles for multinational corporations. For actuaries, these changes complicate the modeling of economic variables, as traditional assumptions about trade flows and global supply chains no longer hold.
2. Capital Flow Disruptions: Geoeconomic fragmentation has led to a slowdown in foreign direct investment (FDI), as countries are now prioritizing investment within their geopolitical spheres. This has a twofold impact: it reduces the ability of companies to access global capital, which in turn dampens economic growth in emerging markets. For actuaries involved in financial reporting and capital adequacy assessments, these disruptions make it more challenging to predict returns on investments and adjust solvency models appropriately.
3. Technology Decoupling: Restrictions on the diffusion of critical technologies—such as semiconductors—pose significant risks to innovation and productivity. For actuarial professionals working in areas like pricing, long-term risk modelling, and forecasting, technological decoupling adds another layer of complexity to the assumptions and data inputs used to model economic growth and market volatility.
4. Loss of Global Cooperation on Public Goods: Geoeconomic fragmentation undermines global collaboration on issues such as climate change mitigation, pandemic preparedness, and cybersecurity. Since these issues require coordinated global efforts, their growing intractability makes it more difficult for actuaries to assess and mitigate associated risks—especially in the context of long-term insurance products designed to address such global risks.
5. Inflationary Pressures: The slowdown of international trade and investment, coupled with the restructuring of supply chains, is leading to inflationary pressures, particularly in developing economies. Actuaries need to adjust their inflation models and pricing assumptions to account for these changes, as prolonged inflation could affect insurance premium structures, investment returns, and claims frequency.

For actuaries, these shifts create significant challenges in forecasting future financial outcomes, pricing insurance products accurately, and managing the volatility of claims and investments. As international risk diversification becomes more difficult, the ability to assess and manage these risks is becoming increasingly crucial.

Implications for the Insurance Industry

Managing Global Risks and the Role of Insurers

One of the most pressing concerns raised by geoeconomic fragmentation is its impact on global risk management. Traditional models of risk diversification, which relied on international cooperation and the global spread of risk, are becoming less effective in the face of rising geopolitical tensions. For example, global risks such as climate change, pandemics, and cybersecurity threats require a level of international collaboration that is becoming more difficult due to the current fragmentation of the global economy.

From an actuarial perspective, this shift means that traditional methods of pricing global risks—such as pooling risks across regions or leveraging international capital markets—will no longer work in the same way. The need for accurate pricing and proper reserve allocation for these risks is even more crucial, especially as insurers face greater uncertainty regarding the insurability of global risks.

International Risk Diversification and Capital Management

The fragmentation of global markets severely limits insurers’ ability to diversify their risk portfolios internationally. The increased concentration of risks in specific regions and industries means that insurers are more exposed to localized risks, which could lead to higher claims volatility. Actuaries need to adjust their models to account for this increased concentration risk and develop new strategies for managing these risks.

The financial markets are also undergoing a transformation as global capital flows become more regionally concentrated. Actuaries working in the area of investment strategy and asset management must navigate the complexities of managing portfolios with limited access to global markets. This could involve rebalancing portfolios to focus on regions less exposed to geopolitical risks or investing in sectors that are likely to benefit from regional self-sufficiency, such as renewable energy or local infrastructure.

Demand for Specialized Insurance Products

The rise of political risk insurance and trade credit insurance highlights the increasing demand for specialized insurance products in response to geoeconomic fragmentation. As trade conflicts intensify and political risks rise, companies are seeking insurance products that can protect against the financial losses associated with these events. For actuaries, this shift requires developing new pricing models for these specialized products, as they involve different risk profiles compared to traditional insurance products.

For example, political risk insurance—designed to protect against the expropriation of assets, trade barriers, or political violence—requires a more granular approach to underwriting. Actuaries must incorporate real-time geopolitical intelligence and predictive analytics into their risk models to assess the likelihood of such events and price these products appropriately.

Similarly, trade credit insurance, which protects businesses from non-payment risks arising from trade disruptions, will become more important as companies face greater volatility in international trade. Actuaries will need to account for the increased likelihood of payment defaults and supply chain disruptions when pricing these products.

Figure 1
Impact of Geoeconomic Fragmentation on Insurance Products and Risks

Retail Insurance and Macroeconomic Pressures

For retail insurance products such as life insurance, property insurance, and health insurance, geoeconomic fragmentation has indirect effects due to the macroeconomic pressures it creates. Rising inflation, economic slowdowns, and heightened risk awareness are all contributing to changes in demand for insurance products. Life insurance, often viewed as a discretionary purchase, may see a decline in demand during periods of economic strain. Similarly, property and casualty insurance premiums may rise due to supply chain disruptions and claims inflation.

Actuaries involved in the pricing and underwriting of retail insurance products must adjust their models to reflect these changes. They may need to increase premiums for certain lines of business, adjust assumptions for long-term policyholder behavior (such as lapses or reduced coverage), and incorporate new risk factors such as geopolitical instability.

Possible Strategic Responses from the Insurance Industry

Given the uncertain trajectory of geoeconomic fragmentation, insurers need to adopt more agile and adaptive strategies. Scenario planning is one key approach that can help insurers navigate this uncertainty.

Scenario 1: Regionalization
In this scenario, the world continues to become more fragmented, with regions forming tighter economic blocs. Insurers should focus on developing products that address region-specific risks, such as political risk insurance and supply chain disruption coverage. Actuaries should refine their underwriting practices by incorporating real-time geopolitical data and scenario analysis to assess risks accurately and develop flexible pricing models.

Scenario 2: Exacerbation
This scenario sees a rapid escalation of trade wars and protectionism. For actuaries, this means greater uncertainty in forecasting risks. Underwriting practices must be dynamic and responsive to rapidly changing trade policies. Actuaries should enhance their stress testing and scenario analysis frameworks to account for the increased volatility caused by these geopolitical risks.

Scenario 3: Bifurcation
In the extreme case of bifurcation, the world splits into two economic blocs, and insurers will be limited in their ability to operate across borders. Actuaries will need to focus on bloc-specific risks and develop highly granular underwriting models to assess the risks within each bloc, including concentration risks. Capital management strategies will need to focus on sectors that receive government support, such as critical infrastructure and national technology initiatives.

Conclusion

Geoeconomic fragmentation is reshaping the global risk landscape in profound ways, with significant implications for the insurance industry and actuarial professionals. The disruption of traditional models of risk diversification, the growing demand for specialized insurance products, and the increased volatility of financial markets all require actuaries to reassess their approaches to risk management, pricing, and capital allocation. By embracing scenario planning, enhancing geopolitical intelligence, and adapting their models to reflect the new realities of a fragmented world economy, actuaries can help insurers navigate this uncertainty and continue to provide essential protection to businesses and individuals in an increasingly unpredictable global environment.

Statements of fact and opinions expressed herein are those of the individual authors and are not necessarily those of the Society of Actuaries, the editors, or the respective authors’ employers.

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Dr. Kai-Uwe Schanz is managing director of purpose for Insurance AG, a part-time research director at The Geneva Association and author of the above mentioned Geneva Association report. He can be reached at kaiuwe_schanz@genevaassociation.org.

Carlos Arocha, FSA, is managing partner at Arocha & Associates GmbH. He can be reached at ca@ArochaAndAssociates.ch.

ENDNOTES

[1] Founded in 1973, the Geneva Association is the only international association of insurance companies; its members are insurance and reinsurance CEOs. As the think tank for the global insurance industry, the Geneva Association carries out rigorous research in collaboration with its members and their companies, academic institutions and multilateral organizations. Learn more at https://www.genevaassociation.org/

[2] Cf. https://www.genevaassociation.org/publication/macro-and-geoeconomic-shifts/insurance-fragmented-world-economy