In modern societies, insurance companies and financial institutions serve a critical role: to reduce risks and provide investments and liquidity to countries’ economies.
This role has become more important since the turn of the century, with the financial system taking on disproportionate importance not only in developed countries but also in emerging economies.
In recent years, it is an undeniable reality that banks, insurance companies and investment funds have, for many, become the symbols of greed and inequality of modern capitalism.
Banks and insurance companies consistently rank at the bottom of the list in international surveys on the most trusted institutions.
One of the reasons for such antagonism is connected with the way financial institutions were blamed for, and have handled, economic crises over the past 20 years or so.
In fact, all these were either created by financial institutions – Lehman Brothers in 2008 being a prime example – or exploited by them.
In my years of working with Sir John Templeton, a financial investment guru, one of the most valuable lessons I learned is that every time there is a market boom or crash and emotions take over, people say: “This time is different”. “It’s never different!” he kept telling me. “Markets are cyclical and history repeats itself. Invest in time of pessimism and sell on the wave of euphoria.”
I treasured this lesson and it has come in handy during the course of my business life. Except this time. This time is different.
The COVID-19 situation has changed our lives in a matter of days in ways we could never have imagined could occur in our lifetime. Not since World War II have people in different countries been unable to leave their homes – and back then it was only a curfew at night.
At this critical time, I believe the only responsible investment is in Maltese companies
Even our fathers’ and our grandfathers’ generations never experienced such a drastic imposition on the way they went about their daily lives.
It’s not difficult to predict, therefore, that such dramatic initiatives will create the biggest economic crisis we will see in our lifetime. Only this time, the crisis is not caused by a greedy bank bankruptcy, or by a hate-driven terrorist attack or by some obscure games played by oil producers.
This time the crisis is inside our bodies. It’s an unknown virus that we cannot kill or – for the time being at least – control. We can only try to keep it at a distance and wait until it either fades away or becomes part of our daily life (like flu).
We do not know how long this pandemic will last. What we do know, however, is that it will leave a path of destruction in our economies and in the way we live.
At this critical time, I believe that not only governments but also insurance companies and financial institutions have a duty to safeguard individuals and help the local economy in every conceivable manner.
We should not only continue to protect our policyholders by providing medical support and life protection, but also safeguard their savings by investing responsibly.
At this critical time, I believe the only responsible investment is in Maltese companies. We have a duty to support local industry and our workers – because if they fail, we all fail.
At Global Capital, we have taken the decision to rotate our investment portfolio and to focus on the Maltese market (within the regulatory limits).
We have also decided to provide special facilities to our individual and corporate clients to address specific needs and liquidity shortage. It is not much, but I think if we all do our bit we can achieve a great deal.
I was not born in Malta, but my heart is Maltese and I want to see this fantastic island continue to grow and prosper. Generations have worked hard to make this country what it is today. We will not betray them by giving in to fear and panic.
Paolo Catalfamo is chairman of Global Capital plc.