Reinsurance giant Swiss Re is forecasting that global insurance premiums will return to growth in 2021, after having contracted in 2020 due to the effects of the COVID-19 pandemic.
The Chinese insurance market continues to show the most promise, with Swiss Re forecasting that premiums will rise by an estimated 10% in non-life next year, and by 8.5% in life.
Globally, insurance premium growth is forecast to recover to 3.4% in real terms in 2021 and 3.3% in 2022, having contracted by an estimated 1.4% this year.
Positively, reinsurance firm Swiss Re’s sigma unit believes that the insurance market has been less severely impacted than expected by the pandemic, as the 1.4% estimated decline in premiums for 2020 is actually only half the previously forecast 2.8% drop that had been expected.
To aid in the economic recovery from the pandemic, the reinsurance firm urges changes in public policy to support sustainable growth.
“For sustainable economic recovery, we need a policy reset. Public policy should focus on areas such as infrastructure, technology and climate. Building new sustainable infrastructure will have a significant impact on GDP growth,“ Jerome Jean Haegeli, Swiss Re Group Chief Economist explained.
“In addition to smarter spending, policymakers should make more use of public-private partnerships and establish the operational and regulatory frameworks to enable greater participation of private-sector finance, including insurers’ assets, in the real economy,“ Haegeli added.
Swiss Re believes that the insurance and reinsurance industry can contribute to a more inclusive form of growth, broadening its its digital reach and leveraging data analytics to help insurers understand customer needs, to provide more tailored and affordable offerings, such as pay-as-you-go covers.
By expanding access to insurance and the usefulness and range of products on offer, “households and businesses can better withstand loss events, which increases resilience by enhancing the underlying capacity of an economy to absorb shocks,” Swiss Re believes.
Positively for the reinsurance and ILS fund market, non-life premiums in advanced economies are also expected to expand by 3% in 2021 and 2022, with the U.S. seeing premium growth driven by the hardening commercial insurance marketplace.
This rate hardening is forecast to persist as well, by the reinsurance firms commercial carrier arm.
“Market conditions from both the demand and supply sides point to continued pricing strength,“ explained Andreas Berger, Chief Executive Officer of Swiss Re Corporate Solutions. “The low interest rate environment and the ongoing social inflation in the US will be key drivers of market hardening.“
The strengthening of insurance pricing is expected to support the market’s “overall resilience in terms of growth and profitability” Swiss Re said, which will clearly read across to reinsurance market’s as well.
Swiss Re believes “rate hardening will continue well into 2021, supporting overall market growth of 2.6% and improving profitability,” for non-life North American underwriting markets.