The Swiss Re Institute has published its most recent research note, Global outlook: Insurance industry strengthens resilience in challenging environment. In it, researchers say total premium growth is forecast to increase 2.2 per cent annually on average for the next two years, higher than the average of 1.6 per cent growth observed during the past five years.
They add that increasing investment returns and hard market conditions will further help the industry’s profitability. Inflation and interest rates in developed markets are also expected to stay higher in the coming decade. Global inflation is forecast to moderate to 5.1 per cent in 2024 and 3.4 per cent in 2025.
“After a resilient 2023 powered by strong U.S. economic growth, the world economy is expected to slow by 0.4 per cent to 2.2 per cent real GDP growth in 2024,” they write. “While the sector will continue to strengthen its profitability, mainly driven by improved risk-adjusted pricing as well as higher investment returns, it is not yet expected to earn its cost of capital in 2024 or 2025 in most markets as economic inflation will continue to have a negative impact on claims costs,” says the Swiss Re Group chief economist, Jérôme Jean Haegeli.
In the past year, historically low unemployment rates have strongly supported consumer demand, particularly in the U.S., they add; consumer spending there is expected to grow by 2.4 per cent in 2023. Central bank policy, meanwhile, is expected to stay restrictive for at least the next two years.
In property and casualty (P&C) insurance, they say significant repricing of insurance risk in 2023 will result in global premium growth around 3.4 per cent this year. This figure is forecast to soften to 2.6 per cent in 2024 and 2025. Improvements in profitability are expected to be driven by higher investment returns given the higher interest rate environment, and by better underwriting.
The paper concludes saying the Swiss Re Institute anticipates strong growth in savings products to occur in the next two years.
