Financial markets update and considerations for insurers
Financial markets and considerations for insurers
Equities and bonds have displayed significant volatility due to stress observed in financial markets.
In March 2020, the World Health Organisation ('WHO") declared Covid-19 as a pandemic. The months that followed were and continue to be engulfed in uncertainty. Entire countries have been shut down in the form of lockdowns as an initial response to curbing the pandemic, working from home has become the new reality, and our entire social construct has been turned on its head.
Equity markets have fallen initially due to risk-off sentiment and still demonstrate significant volatility, bond yields have reached new lows, bid-offer spreads widened, liquidity has evaporated, and credit default swap (CDS) spreads have surged. These factors, coupled with a looming recessionary period, have meant that governments and central banks have provided significant fiscal stimulus and flexible monetary policies to support economies. These factors have led to ultra-low interest rate environments, which will have an impact on investment returns and add to volatility in financial markets.
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