The causal relationship between insurance companies and the macroeconomy also holds true the other way around. Macroeconomic developments can have a significant effect on the financial system, including insurance companies. In fact, Japanese insurance business from the late 1990s onward cannot be discussed without reference to Japan’s declining population and the “negative spread problem” caused by continued low interest rates.
In many foreign countries, growth moderated at the end of 2020, as a spike in COVID hospitalizations and deaths led to tighter public health restrictions in many economies. Retail sales and measures of services activity weakened even as manufacturing and exports remained more resilient. Foreign activity should strengthen later this year as vaccinations rise, COVID case counts decline, and social distancing eases.