Swiss Re Insurance-Linked Fund Management

Xactanalysis Insights and PCS

P&C market hardening a key driver of premium growth for 2023/24: Swiss Re

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Global reinsurance firm Swiss Re is anticipating a return to growth for the global insurance and reinsurance industry in 2023, having seen inflation causing total global insurance premiums to contract by an estimated 0.2% in real terms in 2022.

premium-growth-swiss-reSwiss Re’s Institute now forecasts that the global insurance industry will return to premium growth of 2.1% annually on average in real terms in 2023 and 2024.

This return to growth is expected to be driven by a combination of factors, including an expectation of easing inflation, the evident market hardening in property and casualty lines, as well as stronger life insurance demand, Swiss Re explained today.

In addition, there is another silver lining for the insurance and reinsurance industry, as central bank policy of rising interest rates are anticipated to improve investment results over the medium term.

Jérôme Haegeli, Swiss Re Group Chief Economist explained, “In our view, the global economy will cool down noticeably under the weight of inflation and interest rate shocks. The repricing of risk in the real economy and financial markets is actually healthy and a long-term positive.

“Higher risk-free rates should mean higher returns for investing into the real economy. During today’s challenging times – and for the economic recovery period ahead – the insurance industry can show its value as it provides financial resilience at all levels of the community.”

With inflationary recessions expected across many economies, particularly Europe, over the next 12 to 18 months, the fact insurance premiums are forecast to return to growth, demonstrates the robustness of the insurance and reinsurance industry and also the fact demand for cover is not expected to wane, even with higher prices.

On the non-life side, insurance premiums are forecast to grow by 1.8% in 2023 and 2.8% in 2024, while on the life side, premiums are forecast to grow by 1.7% across 2023 and 2024.

China is again cited as having high-growth potential by Swiss Re, with non-life insurance premiums expected to grow 4% in 2023 and 5.8% in 2024.

Economic recovery and higher P&C pricing are the main drivers of non-life growth expected by Swiss Re.

The growth is expected to be strongest in commercial insurance lines, as rate hardening will be more significant here.

Swiss Re Institute estimates 3.3% growth in commercial insurance premiums for 2022 and a 3.7% increase in 2023.

The hardening market means higher premiums, which can lead to this premium growth, so there may or may not be demand signals here, it is hard to tell.

In some cases, higher prices can actually reduce demand. So the insurance and reinsurance industry needs to remain alert to this and ensure protection gaps remain in focus and aren’t actually growing while the industry shifts focus on areas of more significant hardening, such as the United States.

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