Swiss Re has published its annual world insurance sigma, which forecasts a record-breaking total premium volume of over $7 trillion in nominal terms by year-end and strong global insurance market growth in both 2022 and 2023.
Swiss Re Institute’s prediction of a solid 6.1% growth in total global insurance premiums in 2022 in nominal terms – surpassing $7 trillion for the first time – finds support in steady employment and income growth, rate hardening in property and casualty, and a uniquely heightened risk awareness for mortality and health risks. Volumes will be 17% higher than at the onset of the pandemic, Swiss Re noted – a testament to the resilience of insurance markets.
“Even in the face of a challenging economic environment, insurance remains a vibrant, resilient and growing industry – and reaching the $7 trillion mark for global premiums is a major milestone,” said Swiss Re’s group chief economist Jerome Haegeli. “However, these are not easy times, and the insurance industry will need to keep a close eye on inflation. As the world gets more expensive, so do the costs of accidents and natural catastrophes, and this makes claims more expensive.”
The global economy’s sharp decline, coupled with a decades-high inflation, will weigh on total premium growth, Swiss Re warned, resulting in a below-average 1.2% annual average growth in real terms over 2022 and 2023. It will increase claim costs for non-life insurance, with profitability pressure rising most in lines where supply shortages are leading to price increases on top of overall inflation, such as property and motor. High wage and healthcare inflation is also pushing up the cost of claims for casualty and health insurance.
There is a silver lining, however. “As central banks take action to combat inflation, higher interest rates will support insurers’ profitability in the medium term,” Haegeli said.
Rising claim costs will extend rate hardening, in effect restoring underwriting profitability and paving the way for real premium growth in 2023.
Life premiums are forecast to increase by 4.8% in nominal terms in 2022 and reach $3.1 trillion by year-end. Although this equates to a 0.2% contraction in inflation-adjusted terms, they will return to growth in 2023. Heightened risk awareness, demand for protection-type products post pandemic, and a subsiding volume in COVID-19-related claims will support improved profitability in life insurance.
Non-life premiums will rise by 7.1% in nominal terms in 2022 – a 0.8% growth accounting for inflation – reaching $4.1 trillion by year-end. Swiss Re forecast a further 2.2% premium growth in real terms in 2023 based on ongoing rate hardening, with commercial lines going stronger than personal lines.
The US remains the largest insurance market in the world, with $2.7 trillion total premium accounting for just under 40% of total global insurance volume based on 2021 numbers. It is followed by China, with $0.7 trillion in premium, or 10.1% of global insurance volume. Japan comes in third, accounting for 5.9% of global insurance volume.
Rounding out the five largest insurance markets in the world are Europe’s strongest players. The UK accounts for 5.8% of the total global insurance volume and showed strong growth in nominal terms in 2021, its total premium volumes rising by 16.7%. France holds a 4.3% market share in global insurance volume but showed equally impressive growth in total premium volumes, which rose by 24% the same year.