The Swiss Re Institute's most recent world insurance sigma report predicts strong global insurance market growth in both 2022 and 2023.
While Swiss Re expects total premium volumes to exceed $7 trillion by the end of this year, the reinsurer warns that "a sharply slowing global economy and multi-decade-high inflation will weigh on total premium growth," with 1.2 percent annual growth in real terms expected to be below trend over the next 24 months.
However, claims costs are rising, which is extending rate hardening and, as a result, improving underwriting profitability and underpinning premium growth in 2023, according to Swiss Re. Interest rates are also rising, which will lead to higher investment returns over time, further supporting industry profitability.
"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," said Jerome Haegeli, Swiss Re's Group Chief Economist. However, these are difficult times, and the insurance industry must keep an eye on inflation.
"As the world becomes more expensive, so do the costs of accidents and natural disasters, making claims more expensive." However, as central banks take action to combat inflation, higher interest rates will support insurers' profitability in the medium term."
Nominal global insurance market growth of 6.1 percent would raise total premium volumes 17 percent above the level seen at the start of the COVID pandemic, demonstrating the risk transfer sector's resilience in the face of the crisis.
Swiss Re anticipates stronger growth in non-life premiums, which are expected to increase by 7.1 percent in nominal terms in 2022, totaling $4.1 trillion globally. Swiss Re forecasts 0.8 percent growth in 2022 after accounting for inflation. The world's largest reinsurer expects non-life premiums to rise by 2.2 percent in real terms in 2023, owing primarily to continued rate hardening. Commercial lines are expected to grow faster than personal lines, according to the firm.
Swiss Re anticipates nominal growth of 4.8 percent in 2022, bringing the total for the year to $3.1 trillion. However, the firm expects total life premiums to fall by 0.2 percent this year before rising again in 2023. Swiss Re attributes next year's growth to increased risk awareness and demand for protection-type products in the aftermath of a pandemic.
According to Swiss Re's report, the United States remains the world's largest insurance market, with total premium volumes of $2.7 trillion in 2021, a year in which premiums increased by 8.1 percent in nominal terms.
China remains the world's second largest insurance market, with more than USD 700 billion in premiums, accounting for a sizable 10.1 percent of total global insurance premiums.
According to Swiss Re, the UK and France produced strong nominal growth in 2021, with total premium increases of 16.7 percent and 24 percent, respectively.