Strong growth forecast for global insurance markets as demand for risk protection increases, says Swiss Re Institute

17 November 2021 Swiss Re

• Global insurance premiums expected to grow by 3.4% in real terms in 2021, 3.3% in 2022 and 3.1% in 2023
• World insurance market set to exceed USD 7 trillion in premiums for the first time by mid-2022, earlier than expected
• Insurance profitability supported by heightened risk awareness in both the life and non-life segments in wake of COVID-19 pandemic, and continued strong rate hardening

Swiss Re Institute's latest sigma study forecasts the global insurance industry to reach a new record in global premiums by mid-2022, exceeding USD 7 trillion. This comes earlier than Swiss Re estimated in July and reflects rising risk awareness, increasing demand for protection and rate hardening in non-life insurance commercial lines. The insurance industry outlook is also supported by a strong cyclical recovery from the COVID-19 shock, but economic growth is expected to slow in the next two years due to an unfolding energy price crisis, prolonged supply-side issues, and inflation risks. Long-term structural support for growth is needed, as Swiss Re Institute's resilience analysis in this sigma report shows.

Climate change and digitalisation are significant trends shaping the world economy and insurance markets. Rapid decarbonisation is becoming imperative and societies' approach to transitioning to a green economy will determine the economic outlook. The insurance industry can support the transition to a low-carbon economy, not only by absorbing disaster losses but also by promoting sustainable infrastructure investments that help mitigate the impact of volatile extreme weather. Adopting digital technologies is not only playing a role in increasing global productivity growth, but Swiss Re research also found that the pandemic has transformed consumers' receptiveness to interacting with insurance digitally, pointing to growth potential.[1] A third significant trend is the growing divergence of countries' growth and socio-economic indicators such as inequality – a potential downside risk.

“The economic recovery we are experiencing is cyclical and not structural, with macroeconomic resilience weaker today than before the COVID-19 crisis. As such, we should be anything but complacent. Given its capacity and expertise to absorb risks, the insurance industry is crucial in making societies and economies more resilient. Yet for inclusive and sustainable growth, everyone must be on board. Green growth is sustainable only if it is also inclusive. We have a unique opportunity to build a better market system. For this, all stakeholders will need to accept and internalise the costs of climate change, and policymakers to take into account the distributional effects of their economic policies across their populations. This will help to create the transition we need for a sustainable path to a net-zero economy by 2050," said Jerome Haegeli, Swiss Re Group Chief Economist.

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