The Middle East conflict has become the fourth major global supply shock in six years, according to Swiss Re Institute. Global insurance premium growth is forecast to slow to 1.3% in real terms in 2026, down from 3.9% in 2025, with non-life under particular pressure. The Institute's latest sigma report identifies geopolitical fragmentation and the US$750 billion AI investment boom as the two forces reshaping the global insurance landscape.
Swiss Re Institute expects global inflation to average 4.0% in 2026, around one percentage point above pre-conflict projections, while GDP growth slows to 2.5%. Interest rates are expected to remain elevated as investors demand greater compensation for inflation, fiscal, and geopolitical risk. The report identifies a structural shift as governments increasingly prioritise national security, strategic autonomy, and supply-chain resilience over economic efficiency.
Jérôme Haegeli, Swiss Re's group chief economist, said the conflict is "not a one-off shock but another sign that geopolitical risk has become a structural feature of the global economy with four supply shocks in six years." He said the build-out of AI infrastructure, energy systems, and more resilient supply chains is creating "entirely new pools of risk." Haegeli described insurance as having a "vital role" in derisking these investments and pricing the economic transformation they represent.
Swiss Re Institute estimates that AI capital expenditure by hyperscalers should reach US$750 billion in nominal terms in 2026. The investment is expected to contribute around 0.2 to 0.3 percentage points to US growth, partially offsetting the drag from supply shocks. These assets are generating new demand across specialty lines, including property, engineering, cyber, and business interruption cover, according to the sigma report.
The scale of individual AI projects is creating concentration risk that traditional insurance structures were not designed to absorb. Ivan Gonzalez, chief executive of Swiss Re Corporate Solutions, said the largest AI data centres carry total asset values exceeding US$20 billion before technology installation. He said these "interconnected exposures call for solutions that go beyond traditional insurance, combining risk engineering, alternative risk transfer, and financing to help businesses invest with greater resilience."
The sigma report frames the economic shift as a move from "just-in-time" supply chains to "just-in-case" resilience, as companies reassess supplier dependencies, logistics routes and geopolitical exposures. Gonzalez said demand is increasing for "specialist solutions that support international trade, investment, and business continuity" as fragmentation deepens.
Non-life insurance is entering a softer underwriting cycle, with global premium growth forecast at 0.6% in real terms in 2026. The figure is well below the long-term trend of 3.6% (2015 to 2024), with advanced markets driving the slowdown while emerging markets remain relatively resilient. Swiss Re Institute said the cycle may prove shallower than past soft markets, as rising claims inflation, and growing catastrophe exposures limit pricing corrections.
Despite softer conditions, non-life insurers are expected to remain profitable. The report forecasts non-life return on equity at 11.4% in 2026, from 14% in 2025, with a projected decline to 7.7% by 2028. Still-elevated investment returns are identified as the main buffer against the underwriting cycle downturn.
The longer inflationary pressures from the Middle East conflict persist, the greater the risk that repair, replacement and liability costs feed into claims. Swiss Re Institute said insurers may reprice sharply if large losses, inflation, and capital signals deteriorate beyond expectations.
Life insurance presents a more constructive picture, with global premiums expected to grow 2.3% in real terms in 2026, above the long-term trend. Higher yields continue to support savings and annuity business, and the profitability outlook for life insurers remains positive as reinvestment yields underpin investment income. For emerging markets, favourable demographics, regulatory reforms, and rising insurance penetration are additional growth factors, according to the report.
