Swiss Re reveals impact of higher rates

Advanced and emerging markets expected to contribute to growth exceeding a trillion dollars

Swiss Re reveals impact of higher rates


By Kenneth Araullo

With higher interest rates reshaping the landscape for life insurance growth and profitability, savings products are becoming more attractive to consumers after a decade of low demand and returns.

In a new study, Swiss Re Institute projects a new high for US fixed annuity sales this year, following record sales in 2022 and 2023.

Swiss Re’s group chief economist, Jérôme Jean Haegeli, noted that higher interest rates are significantly impacting the market, providing life insurance and pension products with a boost.

“Savings products are attractive again as a direct consequence of normalizing interest rates. Higher investment yields also benefit long-duration protection products,” Haegeli said.

A new study by Swiss Re Institute, titled “Life insurance in the higher interest rate era: asset-savvy is the new asset-light,” forecasts an additional $1.5 trillion in global insurance savings premiums over the next decade.

This increase is driven by consumers seeking life-savings products that offer higher retirement incomes. Consequently, global premiums are expected to reach $4 trillion by 2034. By contrast, global life insurance premiums grew by only $300 billion during the low-interest-rate decade from 2010 to 2019.

Paul Murray, Swiss Re’s CEO of life & health reinsurance, noted that higher interest rates provide consumers with more attractive options for securing retirement income, contributing to significant market growth for life insurance.

“Higher interest rates also allow insurers to meet their cost of capital. Reinsurers can furthermore support life insurers by freeing up capital, boosting underwriting capacity and focusing on product innovation for capital-light growth,” Murray said.

Higher government bond yields are enhancing life insurers’ investment returns and margins for fixed annuities. Swiss Re Institute predicts that between 2022 and 2027, the operating result for insurers in the largest eight life markets, including the US, UK, Germany, and Japan, will rise by more than 60% as investment income increases by 40%.

The growth in life insurance products is seen as a key mechanism to address the retirement savings gap, estimated at $106 trillion in 2022 for six advanced economies plus China and India.

Advanced markets are expected to lead growth, generating approximately 61%, or $900 billion, of additional premiums in the next decade, while emerging markets are projected to add 39%, or $578 billion. China alone is expected to contribute around 17% of the overall global additional premiums, amounting to $256 billion between 2025 and 2034.

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