Hello, and welcome to Swiss Re's Media Conference. Today, we're going to present you our latest Sigma Research Publication. My name is Charlotte Nelson, and I will introduce you to our speakers. Next to me, we have Jerome Heggely. Jerome is our Group Chief Economist, and he will go more in-depth about the new publication.
It's about de risking global supply chains. Next to Jerome, we have Gianfranco Lotte. Gianfranco is Head of Global Through Insurance. And in this function, he and his team, they look after our biggest insurance clients. We will start with 2 presentations.
And after that, we will do a Q and A. And you have a possibility to write your questions in the chat. You can do that at any time during the presentation. And with that, I would like to hand over to Gianfranco.
Thank you, Charlotte, so much for the kind introduction. Ladies and gentlemen, global supply chain risks. If anything, COVID-nineteen has unveiled how vulnerable and fragile those global supply chains can be. COVID-nineteen also has highlighted some of the trends that have been going on for a while, And those trends are diminishing cost benefits in low labor cost locations. Those trends are also rising risks such as natural catastrophes in certain parts of the world and specifically in parts where production facilities are located.
And thirdly, the application and the advancement of technology, which just makes certain parts of the value chain much more efficient if applied. And those can be artificial intelligence or robotics. The use of those just make products and service production chains more effective if they repatriate home, for example. And we've seen that those trends pose challenges, challenges to corporates and governments. And that's why supply chain is so front and center for governments and corporations that are internationally active.
And those trends really you can see on the left hand side, I'm clicking through my first slide here, and I just want us to focus on the unpredictability of supply. And this unpredictability of supply is a business killer. It kills the plans. It kills the investments, the hiring of employees. That's a real issue for not only corporations, but also for the economies.
And that's why supply chain is such an important topic. Now at Swiss Re, we invest a lot of time and we pride ourselves to dedicate efforts and resources to themes that are really important for our clients, but also for society. And there's 2 value proposition that we will highlight and want to have your focus on and attention. 1 is around insurance. And you can see on the right hand side that insurance is an effective mitigator and can be even more effective going forward, addressing the supply chain risks and the changes that go with it and the unpredictability.
We deal with unpredictability and uncertainty, and that's our business. And the insurance solutions address that part of the unpredictability that businesses struggle with. And on the other hand, we invest time and resources into data, understanding data, collecting data, interpreting data and making sure we understand the supply chain risks. We understand what it means for businesses, and we understand how to make decisions more predictive going forward. And so Jerome will talk about some of the trends that we see with supply chain and supply chain risks.
Jerome will also talk about the strategies that corporates and governments are applying and have applied already and some of the solutions that Swiss Re offers to our clients to make global supply chains more resilient. With that short introduction, I hand over to you, Jerome. Thank you very much.
Well, thank you very much, Gianfranco. Thank you very much, Charlotte. It's really fantastic. While not being with you physically in person in Monte Carlo, here from Zurich and virtually saying hello to you, welcome. This is a really, really special signal.
It's super special because of the topic, and Gianfranco already highlighted while I will go into more details. It's also, obviously, a super special topic because of special circumstances we are in. But it's also a special topic because this is the 52nd year that we are doing our flagship research publication of the Sigma Series, and this is the number 6 this year on supply chain changes. Supply chain changes, it's really busy out there, as you see, with this ship. A lot of things are happening.
We think there are big changes in the making. I will highlight a few of the changes in the making, but I will also put into context. Into context, in the environment we are operating today to see what the effects are on supply chain changes. As Gianfranco has mentioned already, and I think this is really important to stress, COVID-nineteen is accentuating already some of the big macro changes in the making. I will come to that later on.
If I think about the populism, if I think about the U. S. Trade war, these are not new things. They have been happening before COVID-nineteen. If I think ahead, I think it's also big changes underway in some sense.
If I were to summarize it, I think it's somewhat goodbye to the corporate romance of just in time production of hugely complex supply chains to also just in case production. And referring to the title of our Sigma, derisking global supply chains, rebalancing to strengthen resilience. There's also something positive about it. By thinking about just in case production, we also could increase economic But if you take a step back, I think what is really key to remember, I would like to show you this next slide. Yes, you might guess what I'm showing here.
I'm showing here a kidney. Actually, it's 2 kidneys. And I think when you think about supply chain changes, that's the point to remember. There is no economic reason. There's absolutely no economic reasons why to have the COVID-nineteen happening now over the last few years and is being accentuated to COVID 19.
We are seeing 2 we are seeing parallel supply chains. We are seeing 1 supply chain being centered around China with Southeast Asia and the other supply chain centered around the U. S. So it's not a bad thing at all, and I will go into highlight and I will also put the growth tag to it. And you will see the growth tag having these 2 kidneys is actually positive because of the investment at least over the next 5 years.
Well, in auto terms and remaining with this picture of 2 kidneys, I think what has come really real as well with COVID-nineteen is that supply chains are only as strong as the weakest link. So in that sense, having these parallel supply chains forming and also insurance solutions to do risk supply chains can also be something positive. Obviously, and I will also show the limits, there can be limits to it because there could also be efficiency losses beyond the medium term investments to build these supply chains. So I hope next time you think about supply chains, you're also going to think about this kidney. And having 2 kidneys is not a bad thing at all.
Having these parallel supply chains can also make economic resilience much better. Well, talking about the macro environment first, to frame supply chain changes happening. COVID-nineteen is without a doubt, and I have zero doubt about that. COVID-nineteen is exposing, has exposed the global economy to its deepest recession in our lifetime. 2nd, yes, if I look at the data today, global economies are recovering, and it's good news.
However, it won't be a reshaped recovery. The recovery will remain very protracted, and I will show you in a second. I think putting these global supply chain changes happening into the macro context is really important. I think it's really important not just for its growth effect, but also for its potential inflationary effects. So key message on the macro side, no V shaped recovery, deepest recession, but also the worst, at least the worst in cyclical terms, is behind us even if the recovery will remain protracted.
Now to the insurance markets. How do we translate this macro picture to the insurance markets? From key message and afterwards, we'll highlight you why that is so. On the insurance markets, we expect a strong recovery of insurance market premiums. Why?
Why do we expect a strong recovery of insurance market Premium, premiums. Actually, it's pretty simple. 2 main reasons. Number 1, this global recession is likely to be one of the shortest in history, only 2 quarters of super negative quarterly growth rates but still recovering. Number 2, insurance markets, global insurance markets, they are healthy, and we see a lots of demand and lots of growth in Asia and in particular in China, where we remain particularly positive.
So insurance markets premiums likely to recover very strongly, and I will show you a little bit more in terms of numbers and in terms of the patterns to frame the global supply chain changes. Well, here I show you the global economic pattern, economic growth pattern with the graph. With the graph, with the blue dotted line, you see the global economic growth pattern and you see the shock of the COVID-nineteen. You see global economy, that's our forecast, minus 4.4% in terms of global recession for 2020. That's huge, minus 4.4%.
It's much more than the global financial crisis. We still have probably, most of us, the global financial crisis in our back end. And I think it's a useful benchmark to compare COVID-nineteen crisis. If I compare this global economic crisis to COVID-nineteen practice, it's at least going to be twice as big than the global financial crisis. And what's more, the speed is happening twice as fast.
The upside, however, is that the government induced lockdown because of the health crisis has been relaxed and economic data is now also coming up strongly. And that's what you see afterwards, after the 0.0.0, obviously, being the year 2020. Between 2020 2021, you see global growth recovering, bouncing back, great, positive. But let's not go into wishful thinking. The global growth will also come back after the snapback of the actual economic data.
A lot of people are thinking about putting alphabet letter to this recovery pattern. My recommendation, don't do it. There's none that fits. If I would have to characterize this global economic recession, I would say it's a yoyo recession. A yoyo is like the one that you're playing with.
It goes up very quickly. If you're playing as a kid, the Yoyo goes up very quickly, and you see that with the global economic growth bouncing back as lockdown measures are relaxed. However, after the bounce back with the OYO, it also comes down again. Now I don't expect the double dip, but I expect this protracted recovery beyond this peak in the blue dotted line that you see here in the graph for the year 1, which is 2021. So global economic contraction more than twice as deep in global financial crisis.
The speed happening twice as fast. Length of the recession, pretty much short. In terms of how we see the global economy, big picture in terms of regions, yes, we are more positive on China. If I look at the data, definitely more positive. It's a plus in front of GDP growth in China.
And I still do continue to believe China will be the biggest insurance market according to our estimates by the mid-two thousand and thirty, if you exclude Medex. No change in that. So China is leading the global economic recovery path, followed by the U. S. Then followed by the Europe.
The measures that we are watching in terms of the recovery factors to watch, I'm listed them on the left hand side. Some are more cyclical like lockdown measures. Some are more structural like the changes to global supply chains. As you see, we have a neutral sign here. Short term and short term, I define over the next short to medium term, I define over the next 5 years.
We see actually a positive effect for global growth. What's happening beyond the 5 year horizon will also depend very much on government actions. But obviously, what's happening on the labor market front and the corporate front is extremely important. Well, reframing the global macro picture, right, to put global supply chain changes into perspective, let me also quickly touch on what I think is really important for insurance markets, also long term investors. If there's one key indicator to watch, I think it's real interest rates.
Let me show real interest rates because it also matters when I think about global supply changes. You see here in the graph, you see U. S. Real rates, 10 year U. S.
Real rates, and it's also broken down by its interest rate, nominal interest rate component and its inflation component. So what is happening? 10 year dollar real rates are minus 1% today. Before COVID-nineteen, it was positive, almost plus 1% at some point. So we have come down a long way in terms of lowering real rates.
That's also due to Central Bank action. It's also due to the structural factors. Low to negative real rates really matters. It really matters because the low nominal rates is exposing savers, long term investor communities to lower investment income. And there is obviously pressure as well on the inflation front.
And if with real rates being nominal interest rates minus inflation rates, I don't believe you're going to have runaway inflation also because of supply chain changes. But I believe the risks for inflations are on the upside also because of what we are seeing on global supply chain changes. And if you have low interest rates for long run, we definitely are in an environment for lower interest rates for long haul. There is definitely a risk that inflation increases. Even if there's just a small increases, that real rates go more negative as well.
And I think that's not something which is positive for the economic resilience or for society at large. In terms of the factors that we are watching and that we are analyzing for inflation dynamics, for consumer price inflation dynamics. You see them here listed on the left hand side. Fiscal, fiscal stimulus, it's the name of the game. Monetary stimulus more has happened than one would have thought about.
However, monetary policy stimulus definitely has its limits in terms of real economic recovery. We only have now fiscal left to refuel the global economies tank and we still need to have smart spending. Something to watch obviously as well, our Central Bank Framework changes, I won't go into that, but the deglobalization, changes in supply chains, as well as the frictions on the trade front and the tech front, it means also globalization peak is probably in the rear mirror window. And if globalization peak is in the rear mirror window, what does that mean for prices? It also means for prices that we're going to have probably less price competition, meaning more upside pressure for inflation.
So with this macro picture, let me quickly translate to the insurance markets and then come back to what that all means for global supply chain changes. I mentioned before insurance markets. Insurance markets are bouncing back quickly. You see here with our proprietary direct or primary insurance market premiums database from the Sigma, you see the current global financial sorry, you see the current COVID-nineteen led global economic recession, what it means for insurance market premium so far and our expectations beyond 2020, beyond today's shock and also compared to how it looks like with the global financial crisis from 2,007 to 2,000 and 8. The COVID-nineteen path definitely is a bold blue line with the dotted blue line being the global financial crisis.
What you see, you see there's not much big difference in terms of the plunge being taken for insurance market premiums in the first phase. It's quite similar to global financial crisis. We see a sharp reduction in terms of insurance market premiums. However, what is really different is the expectation. With economic data coming alive and coming back pretty strong, at least cyclically, and as you see, for T plus 1 and T plus 2, if you compare today's power for insurance market premiums to the global financial crisis 1, big difference.
We are bouncing back quickly. Insurance market premiums are bouncing back quickly, and maybe it's also because of the recognition of COVID-nineteen being a wake up call for more risk awareness. But definitely, it's also a recognition and a direct function, a direct function of this recession while being the deepest in our history, at least in our lifetimes, also being one of the shortest. And that's what you see, also with the bounce back in the insurance market premiums. So now to the really exciting part.
Now to the really exciting part, and I'm happy to show you what we did on the Global Supply Chain changes, how we translated macro environment, insurance market environment into forecasting the effect of what global supply changes mean for the global economy as well as for insurance market premiums. Just in terms of the key message on the economic growth front and insurance market implications, we are seeing relocation and reshoring. And we expect that this power layer supply chain, thinking still about this second kidney, which is being developed, it will require investments. It will require capital expenditures. It will add to export additional exports.
And we estimate that these are additional investments to build the second kidney is worth around $1,000,000,000,000 over the next 5 years. Now yes, there are specific assumptions. They are outlined in the next slide that I'm going to show you, and there's more in the Sigma report. Dollars 1,000,000,000,000 it's going to add about 0.2 percentage growth for global growth, and it's going to add around 63 $1,000,000,000 in terms of additional new insurance and premiums. So what did we do?
And a little bit more in terms of the details you see here. You see here and I really think this is the core slide showing the core results of this Sigma on the big macro changes, paradigm shifts happening with the supply chain changes. You see on the left hand side which countries could be the potential winners. We determine these countries, obviously, not by accident. We have a scorecard where we look at attractiveness of FTI, where we look at export intensity and many other factors.
And we have it also in the appendix later on, if you were interested or then in the Sigma. But what is happening in terms of potential winners? And we assume that about 20% of the value added exports from China is going to 20 lower wage emerging markets and another 10% to reshowing to advanced markets. So China is definitely at the focal point. We assume that some of the exports from China is going to happen in other countries.
That's not necessarily bad for China, not at all. And it could even be Chinese companies doing it. But clearly, and I think Jean Francois alluded to it in terms of cost, also cost changes. There have been many cost changes when you compare, for example, China to Vietnam. So some of the changes and with the different labor costs in Vietnam being about half in China, it's no surprise to see the relocation, Vietnam being top amongst the top 3 and actually even amongst the top one.
But key point is in terms of potential winners, Southeast Asia is definitely going to be the region, which is the host of relocating some of the manufacturing processes. However, it's also the case that in many advanced economies, many of the European advanced many of the European economies as well as U. S. Are going to be the beneficiaries from bringing production home back home, and that's reshoring. So you see potential winners, Southeast Asia for the relocating in 3rd doing the production in China in another 3rd country and reshoring in advanced economies.
And on the right hand side, you see the growth simulation model. Again, what I said in terms of the model assumption based also on surveys from big corporations. It's here in the footnote. I won't repeat it. I think the numbers are of interest.
Again, additional investments of $1,000,000,000,000 likely to translate into global growth being up 0.2%. And I think that's a key point, meaning building that sick and kidney is actually not a bad thing at all. It can make it resilient, hopefully also with more insurance market solutions to have that risk absorption capacity. Insurance market premiums that we estimate happening as a result of the growth increasing is $63,000,000,000 again over a 5 years period of time. Now I want to say, and I think it's important, dollars 63,000,000,000 that's a really conservative figure.
It's at a really lower end. Pretty convinced it's at lower end because we cannot model the change in risk awareness or the wake up call being implied by COVID-nineteen. No way. So this is definitely a very conservative estimate, and please take it as a lower bound. Now this is to the potential impact on economic growth and insurance markets.
Let me just highlight the driving forces of supply changes underway. Key message being COVID-nineteen is definitely accelerating some of the messages, some of the changes underway already before COVID-nineteen. It was alluded to it before, populism, U. S.-China trade war before COVID-nineteen, now a big shock. It's going to accentuate further.
And we are also moving away from the just in time production. And also think about just in case production. I think that's also definitely an upside. And hopefully, supply chain is going to become stronger because, let's not forget, supply chains are only as strong as its weakest link. I won't go into much detail into this slide other than given that also Gianfranco mentioned already many parts, which are important.
Let me just focus on the future impact. So on the right hand side, on supply chain adjustments. Accelerator COVID-nineteen, no surprise on that front. Supply chain adjustments, three points. Number 1, I think we're going to see more diversification, more diversification because of what is happening on supply chain front, be it geographically, but also more diversifications to the suppliers.
2nd, supply chains are also going to be closer to consumers and simpler. I think that a positive development. In terms of our insurance markets, and we listed it as a last point here on Slide 13 at the end, the supply chain adjustment, insurance and risk transfer solutions, definitely it's going to be more demand. There's no question about it. $63,000,000,000 that's the model estimate that we generated.
The assumptions are we're seeing in the slide and there's more in the Sigma report. Please have a look. Please go through it. And again, don't forget, I definitely believe it's at the lower end. Now to be really complete, but checking also the time, I want to just one more content slide and then we can wrap up.
The global supply chain disruptions in terms of framing it in a cross country perspective, yes, China is at the focus. China is in the focus. It's the largest producers and manufacturing hub of the world. You see on the left hand side the participation of the 20 largest economies in the global supply chains. And you see the world's largest 20 economies, they're highly integrated.
It's a highly globalized world already. 40% to 80% of the exports of the 20 largest markets and advanced economies are integrated in the global supply chain. That's quite a lot. It's really a lot. And China will remain at the core of global supply chain changes even after the changes as I have highlighted.
No question about that. 3rd, and you see that on the graph on the right hand side in terms of experts, which experts are more exposed from global supply chain changes? Look at the top 3. It's going to be computer, electrics, textile and those are some of the medical equipments. Some of the actions that I'm highlighting here and some of the changes for these sectors have, again, have happened before COVID-nineteen.
And we see it with electronics production having parts of it moved or not moved, more better relocated from China to Vietnam. And again, it can also be Chinese companies doing it for cost benefits analysis. With this, happy to sum up. Well, three key takeaways. Number 1, there is macro trends in the making already before COVID-nineteen.
Global supply changes are well underway, and it's big. It's reshaping also how the global economy operates. It has direct implications for global growth, 0.2% upside, at least over the next 5 years, and they could also increase pressure on the inflation front. Having that second kidney is not a bad thing. So that's why there's also urge for global supply chain resilience.
2nd, there are opportunities. The opportunities from the global supply chain changes forming. One of the opportunities is additional investments. Having that additional kidney is not a bad thing. If you need it, you're really happy.
So having parallel supply chains is also going to help the absorption capacity against new shocks, and we saw it in COVID 19, the shock can be really huge, and it can really expose our global supply chains. As measured from our analysis, the translation of the investments of $1,000,000,000,000 going into CapEx or additional exports, it translates into around SEK 63,000,000,000 additional new insurance market premiums over the next 5 years. 3rd, I think we should be really clear about that and intellectually honest. Yes, we have shown you positive effects for the global economy, a plus. It's a +0.2%.
It's good to have that second kidney. There are 2 forces. There are the corporate forces to make global supply chains simpler, but there's also government forces. And there's also the risk that government forces, populism, trade wars goes too far, that we have not just 2, 3 or 4 kidneys, we have too many parallel supply chains and that definitely will be an efficiency loss. So we are positive in terms of what's happening over the next 5 years also because of the additional costs and additional absorption capacity being happening because of the additional supply chain, but we should also watch that geopolitical risk out there.
It's not small. As we all know, it's something which has been around us for some time and likely to stay with us also for some time. With this, happy to pass over to you, Charlotte.
Thank you, Sharon. May I ask you to go to the next slide, please? Thank you. So before we lead over to the Q and A, I just wanted to make you aware that the Swiss Re Institute has been very active. We have actually published 3 new publications in the last 2 weeks.
And I think the topics might be of interest to you. So that's why we wanted to highlight them here. So we had another Sigma on the topic of the development of global resilience. This is basically an update from the Sigma we presented last year in Monte Carlo. Then we have an expert publication on low interest rates and what does that mean for insurers.
And finally, there is a publication on financial repression. And all these publications you can find on our Web site. And I know Sharon would also be happy, of course, to take questions on these topics today. So and with that, I would like to lead over to the Q and A. And we have some questions here on the chat.
Please, if there are other questions, feel free to write them in the chat. So the first question here comes from Philip Thomas. And he's asking what detrimental effects could reshoring have on shipping markets, excess supply of container vessels and thus on marine insurance premium income?
Well, thanks very much, Filip, for your question, very specific question. What are the adverse effects? Is that the capacity around, first of all, right, it's a little bit your question as well, 4 vessels for shipping because of the additional demand now being driven with these power supply chains. I do believe there is because why do I say that? Because if you look at the extent of trade of exports, exports have been coming down.
We have seen the peak in terms of trade activity already 2, 3 years ago. And with the peak behind us, it also means there's excess capacity. I can maybe highlight on Slide 22. If you can go to Slide 22, you see actually, it's the next slide, yes, Slide 23 in that case. You see actually here there's a line ocean marine.
It's not a huge effect, right, in terms of what's happening for insurance market premiums driven by the increase in activity led by the second supply chains. You see here Ocean Marine, dollars 600,000,000 So it's pretty small. But to your question, do we have the capacity? Yes, I do believe we have the capacity because we had seen trade activity peaking already a few years ago. So the ships are around.
Thank you.
Just to build perhaps on your point, Jerome, there's also an importance around how those ships track values, right, and how insurance becomes an even more effective and efficient way to mitigate those risks, right? As we become more intelligent about what is being shipped and how much is being shipped and where it is, it just makes the insurance proposition even more powerful.
Okay. Thank you. Then we go to the next question. It's from the publication Emerge Inn. And the question is, will the changes to supply chain require new types of insurance?
Is it a case of a rise in demand for existing products? Or will underwriters need to create solutions to new risks that will be created by the shift in supply chains?
I think the answer is pretty clear, but it's unfortunate. Thanks, Jerome.
I'll start with that. Think it's going to be both, right? It's going to be existing products and solutions, making it more widely available, make those more efficient. And then there's new products and new insurance solutions that need to be created to address some of the risks that we don't know today that they exist actually or have been accentuated by this global supply chain shifts that Jerome just talked about before. So we do think there's an opportunity for the insurance industry to step up to address the challenges that come with the shift and propose efficient insurance solutions to customers.
So I think I'm pretty confident that it's a growth story.
Maybe to add, Johan Frankel, what you said on the data, I think, was so important, right? And you highlight some of our partnerships. And having better data, I think, is also something which can help us in creating more insurance solutions. When I think about data and make the analogy to oil, yes, I do believe data is newer oil. But the upside is it is green, right?
And it's also benefiting the societies. If you have more data, we can get these insurance solutions out there.
Couldn't agree more.
Okay. The next question is from Anna Sager from Insurance Insider. And she's asking, you said that the €63,000,000,000 figure was the low end of estimates. What is the upper end of those estimates? What is the range of estimates?
Okay. Thank you, Anna, for that question. I fear they would it might come. I cannot give you a range. I really can't.
We have data driven in terms of our research. 63 is the output from the model, and all model parameters are out there. Again, we can't model the higher risk awareness. We can't model all technological advances that you and Franco talked about the partnership, new insurance solutions we just discussed with data. I'm positive that we're going to do and benefit from data and technology.
That's why I say it's really at low end. I could really imagine it's going to be triple or quadruple than that. But again, that's what I can imagine. I cannot back it up with data. And I just want to leave you with the data and the statement, it's at a lower end.
Thank you.
Okay. And the next question comes from Patrick Hagen from Physicians Monitor. He's asking, can you give some more details on the additional insurance cover needed by the changes in the supply chain?
Yes. If you want to go first.
Yes. No, I'll start perhaps, right. I mean, there's a number of risks that are identified and a number of risks that are not insured yet, right, in specifically in the emerging markets. And so actually quite traditionally, natural catastrophe risks are not always insured and specifically not with the commercial businesses there and with the production facilities being very close to water typically, flood risk comes to mind immediately. And so it's a penetration topic.
We need to, as an industry, be more mindful about how we construct these insurance solutions. There's parametric insurance solutions, which pay out more immediate if a business interruption happens following a flood, for example, or following an earthquake. And then there's new typology of risks. I'm thinking of cyber, for example, who any attack on data and loss of data could result in interrupt business interruption, not only of the immediate attack company, but also the companies that they supply goods and services with. And so I think that's a relatively new risk that has emerged.
But yes, it's difficult to predict what kind of risks that are out there, but certainly we constantly monitor those. But those will be two examples, one more around penetrating the existing risk landscape and making sure that we explain to potential buyers what the benefits are of insurance. And the second one is covering risks that may be not on the radar screen of corporations that depend on supply chains. Jerome, anything to add from your side?
I think it was a superb picture. Nothing else from my side. Thank you.
Good. Then we go to the next question in the chat. This says, now that all major countries like the U. S, Japan, some European countries are trying to shift their supply chain out of China, How would it impact China and rest of the world? Will it help countries like India and other Asian countries?
I'm happy if you go maybe to Slide 11 just to illustrate again what is happening, right? If you look at Slide 11, yes, you're absolutely right. And it's our core assumption, not just our but the industry's at large core assumption that some of the production facilities are going to move out of China. But let's not forget, these are not just non Chinese production facilities. These can be also very, very Chinese productions moving out from China.
Who's benefiting is Southeast Asia. Vietnam, Cambodia, Malaysia, Thailand and Philippines are topping the list. They're not going to go to Europe to relocate because of disadvantages in terms of cost. Now they're going to Southeast Asia. And again, Vietnam, if you look at labor cost, it's about half than what it is in China.
And once again, it's not just non Chinese moving out of China. It's also China production facilities moving out. You asked about also what could it mean for China itself. Don't want to go into details. However, I don't think it's a negative development.
It's not a negative development either that China growth as China becomes more advanced, extremely more advanced, extremely more mature economy that the growth rate is coming down. So in some sense, it's also positive development to see growth in China being more sustainable. Some parts of the supply chain is moving out. Also, it's low added value often in terms of supply chains. Some of the new services are going to to come to China.
And we all know China is also leading a number of tech areas. In terms of the specific numbers for economic growth, yes, the specific numbers, at least, for gross domestic product, not gross national product, but gross domestic product is in the first instance slightly marginally negative, but there's so much buffer available in China when you think about monetary policy where interest rates are, are also where the fiscal room for maneuver is. So we have full confidence that for China, this is not really a risk factor. Global supply chain changes, it can also be an opportunity to accelerate the move in their own value added for services. And technology was just one example.
Thanks a lot.
Thank you. Then we move to the next question. How will COVID-nineteen impact the Asian insurance market, which is already seeing a huge protection gap?
From my end, I think the first observation is, as you just said, it's a huge protection gap, meaning there's a big difference between economic losses and what is in short, which is defining these protection gaps, be it natural catastrophes, be it on mortality or be it also on other lines of business. I think the natural consequence with technology and with better data, with better foresight, maybe also with better planning at the corporate as well as solutions being provided by the government and concerted efforts. Japan is spending $2,000,000,000 to get better crisps of what the supply chain's dynamic is. So governments are acting. Governments are acting in keeping in trying to understand how the supply changes the networks and the nodes of these supply changes are looking like.
That means, for me, the cap will hopefully narrow. I would expect the government actions to bear some fruit. I would expect the risk of earners to lead to also some changes. And with the changes, obviously, Insurance Market Solutions are part of it.
Just to highlight what you just said, Jerome, the risk awareness is up, right? I mean, the COVID-nineteen is one of a few events that happened. SARS, if you remember in 2000 and 3, 'four, we had the swine flu. We had a number of events on the pandemic side. We had a number of events on the natural catastrophe side.
And that fuels this risk awareness. And to Jerome's point, there's absolutely demand for more insurance and more reinsurance in that region. And so we see Asia as a growth opportunity, a growth opportunity for Swiss Re to contribute to society as well as to our customers in terms of new insurance propositions to close that protection gap that Jerome was just talking about before.
Okay. The next question comes from Philip Thomas. And it says, how about the insurability of political risks associated with supply change? For example, sudden imposition of trade sanctions that might strand merchandise in the country of manufacture.
So I'll start, Jerome. Yes. So political risk is a proposition of the insurance industry. We do cover expropriation. We do cover measures that governments are taking against private companies in certain countries.
So there is a line of business that is specifically targeted to cover those instances. Clearly, the world has become more risky from that point of view. So at the same time, we monitor very carefully what the political risk landscape looks like and carefully adapt our propositions accordingly.
Okay. And there is another follow-up question from Philip Thomas. How about the liability risk run by buyers whose textiles are produced under perhaps substandard labor conditions? For example, in the case of a Bangladeshi factor burning down with associated loss of life?
Very good specific question around that. I can't give a definite answer on that. But of course, it's a complex we're dealing with complexity around supply chain risks and the liability that somebody may have because of production facilities in other countries that have not been have not been led with Western standards is hard to say at the moment. But we can follow-up on that question specifically. Well, Jerome,
maybe just to add, and obviously, I won't go into specific and commenting. What you just commented that specific case. I'm not sure if the specific case was just for illustration. If it's just for illustration, it's just to say that sustainability. Sustainability is really at the core of our business.
And obviously, we want to provide insurance solutions to help to make the global economy more resilient, right? We are Swiss Re. Since 20 December, we are the signatory of principles of responsible investments. That's for the investment side. We have very clear sustainability framework, sustainability councils when it comes to underwriting as well over the last few years.
We have a sustainability report out there. So obviously, what you just mentioned, that case, it's not something where we want to provide where we can help to derisk with insurance solutions. I do hope, however, that with better data, with better technology that we also have, and I'm saying we as a community, as an insurance community, that we always have better data around, so that we can better target the sustainability efforts by us, but also by our industry and thus make a step forward to help them to make the global economy more resilient.
Thank you, Jerome. I don't see any further questions in the chat. So when I say thank you very much for attending today, We will post the presentation from today as well as a press release and also a recording from this session on our website. And yes, have a good day and goodbye.
Thank you. Thank you.