Global insurance premiums will exceed $7 trillion for the first time by mid-2022 with the ongoing rate hardening in non-life insurance commercial lines providing further support.
This is according a report released by the Swiss Re Institute titled Sigma: Turbulence after lift-off: global economic and insurance market outlook 2022/23.
The report projects that the premium will reach a 3.3% in 2022 and 3.1% in 2023 on the back of rising risk awareness in the life and non-life segments which is pushing consumers and businesses to seek protection following the shock of the COVID-19 pandemic and above-average natural catastrophes.
Key highlights of the report
The aftermath of the pandemic has made it clear that the insurance industry plays the role of a risk absorber in times of crisis by providing financial relief to households, businesses and governments.
The global supply chain disruptions highlight the need for better protection to improve societal resilience.
Climate risk is still on the frontline given extreme weather events, and above-average insured losses from natural catastrophes which has added urgency to the race to net-zero carbon emissions.
What to expect in 2022
As the industry absorbs COVID-19-related claims, above-average catastrophe losses and high inflation, Swiss Re expects a strong rebound from 2022.
Non-life underwriting profitability should recover fast as insurers internalise expectations of higher inflation, and rates in commercial lines rise again.
Advances in COVID-19 vaccinations should strengthen profitability after a year of high mortality for life insurers,
Investment returns will likely be challenged by ongoing low-interest rates that do not fully compensate for inflation, making underwriting discipline crucial.
Commenting on the report, Jerome Haegeli, Swiss Re group chief economist said, “Market conditions suggest that positive pricing momentum will continue across all lines and regions. Inflation-driven higher claims development in all lines of business, continued social inflation in the U.S. and persistently low interest rates will be the main factors for market hardening.”
The study implied that the outlook for the insurance industry is also boosted by a strong cyclical recovery from the COVID-19 shock, but economic growth is expected to slow down in the next two years due to an unfolding energy price crisis, prolonged supply-side issues, and inflation risks.