Swiss Re Institute sigma 2/2023 – World insurance: Stirred, and not shaken
Armonk, NY (July 10, 2023) – Global economic growth has been stronger than anticipated so far this year, but a slowdown in the second half remains on the cards. Still-high inflation means today’s interest rate mantra is “higher for longer,” which has implications for the insurance sector also.
High interest rates sparked bank sector instabilities earlier this year but with their sound capital positions, insurers have not been shaken by the disruptions in the financial system. If anything, we expect the industry to demonstrate resilience over the next two years. We forecast that global insurance (non-life and life) premiums will grow by 1.1% in 2023 and 1.7% in 2024 in real terms, after contracting by 1.1% in 2022. And, reflecting the stirrings of market growth, we see premium volumes rising to a new high this year, in nominal terms.
As the table below shows, in terms of nominal premiums, last year the US remained by far the largest insurance market in the world. China and the UK ranked as the top 2 and 3, respectively. Canada, India and most notably Brazil increased their shares of global premiums last year. We forecast that India will be the sixth largest market by 2032.
Premium volumes, 2022 vs 2021, in nominal terms
Premium volumes, 2022 vs 2021, in nominal terms (Source: Swiss Re)
Non-life
In non-life, the main driver of the growth will be market hardening in commercial and now also personal lines, with insurers raising premium prices to offset inflation-induced rising claims costs. We see the motor segment returning to growth after three years of contraction, but a decline in health premiums due to the end of the pandemic support policies in the US could offset gains in other lines.
“With inflation pressures still persistent, hard market conditions in non‑life are set to continue as insurers offset elevated claims costs with higher premium prices. Once disinflation takes hold with prices decreasing, less expensive claims and greater returns from interest‑rate‑sensitive investments should further support industry profitability,” Jérôme Haegeli, Swiss Re’s Group Chief Economist said.
Life
In life insurance, rising wages and interest rates in advanced markets are creating favourable growth and profitability tailwinds, including demand for annuities and pension risk transfer products. We also see new life risk pools in Hong Kong as a result of China’s reopening. Global savings products premiums should grow, driven by an estimated 4.3% gain in the emerging markets.
The profit outlook for life insurers is positive, based on four key drivers: improved investment returns, normalisation of COVID-19 related claims, a de-risking of pension and annuity premiums, and a stabilisation of earnings volatilities with implementation of the IFRS 17 accounting framework this year. On the downside, however, amidst the low growth and still-high inflation environment, we flag credit downgrades and lapses as two potential tail risks for sector earnings.
- Access the full report: sigma 2/2023 – World insurance: Stirred, and not shaken
About Swiss Re
The Swiss Re Group is one of the world’s leading providers of reinsurance, insurance and other forms of insurance-based risk transfer, working to make the world more resilient. It anticipates and manages risk – from natural catastrophes to climate change, from ageing populations to cyber crime. The aim of the Swiss Re Group is to enable society to thrive and progress, creating new opportunities and solutions for its clients. Headquartered in Zurich, Switzerland, where it was founded in 1863, the Swiss Re Group operates through a network of around 80 offices globally. For more information, please visit www.swissre.com.
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SOURCE: Swiss Re
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