This has uncovered a remarkable set of metrics – how to predict how robust a country is financially to weather “future shocks” ranging from another global recession to climate change and predicting how likely it is to bounce back from financial setback, based on new key metrics.

“The latest Sigma is an industry-first. We have constructed new indices that go beyond the traditional GDP growth measures for economic strength, and introduce a systematic approach to quantify insurance protection gaps,” says the paper, going on to say that “the capacity of the global economy to absorb new shocks has waned and is now lower than before the global financial crisis ten years ago.”

The survey, which studied 31 developed and emerging economies between the years 2007 to 2018, did not include South Africa as one of its subjects. However, it highlighted Italy, which ranked second lowest out of the 31 countries for its ‘resilience’.

Italy’s lack of resilience: factors

These are the components that the survey said went into Italy’s ranking:

• Italy faces prolonged economic stagnation, a shrinking population and large “protection gaps” – meaning gaps in insurance coverage for the average citizen
• At 131 percent of GDP, Italy's public debt is the second highest in Europe. With public finances under severe strain, the state is increasingly shifting the burden of financial protection to individuals.
• This has led to a 10% increase in private insurance pension funds annually over the last decade.
• Recent public-sector incentives have also sparked greater uptake of private natural catastrophe covers.
• Even so, the public and private sectors must do more to improve national resilience against (still) large pension, healthcare and natural catastrophe protection gaps.

SA – a disturbing parallel

“One doesn’t need to look too far to find similarities between Italy and South Africa,” comments CEO of MiWayLife Craig Baker. Almost point for point, a case can be made for all Sigma’s signs pointing to increased frailty in the case of economic shocks:

• South Africa, with our revised 0.5 percent growth forecast after the MTBS, faces prolonged economic stagnation. We are also one of the few countries in Africa with an ageing population.
• After the budget speech it seems South Africa’s debt to GDP ratio will be over 70 percent.
• Recent ASISA figures show that South Africa’s life and disability insurance gap has widened yet again to R34.7 trillion in 2018 – certainly speaking to “large protection gaps”.
• This means the “large pension, healthcare and natural catastrophe protection gaps” Italy is noted for are eerily like South Africa’s.

Historically plagued with inefficient infrastructure, on-again-off-again corruption scandals involving public servants and government administration and financially very dependent on its tourism industry and yet with a burgeoning and robust insurance industry, Italy may well be likened to the ‘South Africa’ of Europe.

“The difference? Although Italy has been noted for increasing uptake of insurance in the face of government and infrastructure being dependable, South Africa has not. Our country is still chronically underinsured, especially on the life side, despite a very narrow and flimsy social safety net,” adds Baker

What’s your resilience score?

“Wouldn’t it be interesting, not to mention convenient for insurers and investors, if we could score an individual their resilience? It is human nature to minimise and avoid the more unpleasant realities of life, like the fact that misfortune can and does happen. The sort of events one needs insurance for. Some clear-eyed, practical way to look at how well you’re set up financially to weather such events could be really useful – particularly before catastrophe arises.

It is perhaps resilience which is most important in a portfolio, a life savings, a retirement annuity. We often calculate our financial stockpile’s worth by their ability to allow us to afford our dreams, but how about the various ‘life happens when you’re making other plans’ events one is almost guaranteed to have? Surely a person should not only have enough for the life that they want, but enough to protect the life that they want from the life that happens when you least expect it?”

The Sigma report offers a creative new template for this. Although dealing in countries, it’s parameters for Italy’s lack of resilience speak solemnly to an individual’s own warning signs.

Here are some key points to consider:

• Take a good look at your ‘economic stagnation’ curve within your life.
• What is your debt ratio?
• How is your ‘ageing’ and the quality thereof?
• How many individuals do you support? Think of this as your ‘population’, as though you were a country. The higher your population, the greater your financial resilience must be. The more people your finances support, the more vulnerable they are to not just your individual potential misfortunes, but others’ as well.
• Do you have any ‘protection gaps’? You may have vehicle finance and medical aid, but how is your household contents insurance? Medically, do you have gap cover? Have you ensured your loved ones are adequately covered, so that insurance is there to financially support them so you don't have to?

Upping your financial resilience

There are two ways to increase your financial resilience: massively increase your disposable income or increase your insurance for various things. The third way – investing in a crystal ball and then a padded cell to ensure no unexpected harm ever befalls you or yours – is unfortunately not really an option. For the average person unable to write-off R100,000 for a new vehicle after an accident or R18,500 per day for sudden hospitalisation, insurance is a practical solution.

“Ultimately, the more honest you are with the fact that unforeseen events happen, the more prepared you are to weather them when they come. This is what resilience is about – beating life’s surprises so that they don’t beat down your financial dreams,” ends Baker