With zombie companies likely to fail, insurance firms up premiums

These firms lack the cash flow to cover interest payments and are likely to collapse once gov’ts end pandemic fiscal measures.

The expectation that hundreds of so-called zombie companies will fail over the next few years and drag on the economy is among the major concerns prompting insurers to reduce risk and charge higher premiums, a trend likely to continue as failures increase, Swiss Re AG has said. Zombies – which lack the cash flow to cover the cost of their debt – are “a ticking time bomb” whose explosive effects will be felt as governments and central banks withdraw measures that have helped keep them alive during the pandemic, Jerome Haegeli, chief economist at the Swiss insurer, told Reuters. The sober prediction comes as stock prices hit records and the United States economy appears headed for 6.5 percent growth this year. Yet these strengths are illusory, Haegeli said, because they are based on temporary fiscal and monetary support.