Swiss Re Institute's latest World Insurance sigma published today forecasts strong global insurance market growth in 2022 and 2023 with total premium volumes expected to rise above USD 7 trillion in nominal terms for the first time ever by the end of this year. However, the combination of a sharply slowing global economy and a multi-decade-high inflation will weigh on total premium growth with an expected below-trend 1.2% annual average growth in real terms over the two years. Rising claims' costs are seen extending rate hardening, the latter improving underwriting profitability and underpinning premium growth in 2023. Furthermore, rising interest rates will over time also support industry profitability by yielding higher investment returns.
Jerome Haegeli, Swiss Re's Group Chief Economist: "Even in the face of a challenging economic environment, insurance remains a vibrant, resilient and growing industry – and reaching the USD 7 trillion mark for global premiums is a major milestone. However, these are not easy times, and the insurance industry will need to keep a close eye on inflation. As the world gets more expensive, so do the costs of accidents and natural catastrophes – and this makes claims more expensive. However, there is a silver lining, as central banks take action to combat inflation, higher interest rates will support insurers' profitability in the medium term."
The key findings from this year's World Insurance sigma are:
• Swiss Re Institute forecasts strong 6.1% growth in total global insurance premiums in 2022 in nominal terms, surpassing USD 7 trillion in total volume for the first time. This is supported by solid employment and income growth, hardening property & casualty premium rates and heightened risk awareness for mortality and health risks. At this level, volumes will be 17% higher than at the onset of the COVID-19 crisis, reflecting the resilience of insurance markets over the course of the pandemic.
• The current high inflation environment will weigh on premium growth in real terms and increase claim costs for non-life insurance. Profitability pressures from economic inflation will rise most in lines such as property and motor, where supply shortages are leading to price increases beyond the surging overall inflation. High wage and healthcare inflation is pushing up claims' costs for casualty and health insurance.
• Rising claims' costs will also extend rate hardening, restoring underwriting profitability and supporting premium growth in 2023. Thus, the industry will exhibit resilience in the face of the economic slowdown and return to real growth in 2023.
• Non-life premiums are forecast to rise by 7.1% in nominal terms in 2022, amounting to USD 4.1 trillion globally by the end of the year. Accounting for inflation, this will amount to 0.8% growth. For 2023, premiums are forecast to grow by 2.2% in real terms, based mostly on ongoing rate hardening. Growth is expected to be stronger in commercial than personal lines.
• Life premiums are forecast to increase by 4.8% in nominal in 2022, reaching USD 3.1 trillion by year end. In inflation-adjusted terms, however, life premiums will contract by 0.2% in 2022 returning to growth in 2023. This growth is based on the heightened risk awareness and demand for protection-type products post pandemic. Additionally, while COVID-19-related claims will linger in 2022, their volume will likely subside, thereby supporting improved profitability in life insurance.
• The US remains the largest insurance market in the world, with total premiums of USD 2.7 trillion in 2021. The US grew 8.1% in nominal terms in 2021.
• China is the second largest market with over USD 0.7 trillion in premium, accounting for 10.1% of the total global insurance volume.
• In Europe, both the UK and France showed strong growth in nominal terms in 2021, with 16.7% and 24.0% increases in total premium volumes, respectively. They remain the 4th and 5th largest markets globally.
Download the publication here
Get the latest issue of FAnews