According to a recent projection from the Swiss Re Institute, the global insurance market will achieve a new high in premiums by mid-2022, surpassing $7 trillion. The record is expected to be set sooner than the Swiss Re Institute forecast in mid-July, owing to increased risk awareness, demand for protection, and rate hardening in non-life insurance commercial lines.
The sector’s forecast is further bolstered by a strong cyclical rebound from the COVID-19 epidemic, but the study showed that economic growth will decrease in the following two years due to a growing energy price crisis, prolonged supply-side concerns, and inflation risks. According to the Swiss Re Institute, long-term structural support for growth is required.
Climate change and digitalization are two developments that are influencing the insurance industry. According to the Swiss Re Institute, rapid decarbonization is becoming increasingly vital, and how societies approach the transition to a green economy will determine their economic outlook. The insurance business can help with this transformation by absorbing disaster losses and encouraging long-term infrastructure investment.
The study concluded that adopting digital technologies is vital for promoting global productivity growth and that the epidemic has enhanced customers’ willingness to connect with insurers digitally.
Another noteworthy trend is the widening difference between countries’ GDP and social indices such as inequality, which the Swiss Re Institute sees as a potential downside risk.
“The economic recovery we are experiencing is cyclical and not structural, with macroeconomic resilience weaker today than before the COVID-19 crisis. As such, we should be anything but complacent,” said Jerome Haegeli, Swiss Re group chief economist.
“Given its capacity and expertise to absorb risks, the insurance industry is crucial in making societies and economies more resilient. Yet for inclusive and sustainable growth, everyone must be on board. Green growth is sustainable only if it is also inclusive. We have a unique opportunity to build a better market system. For this, all stakeholders will need to accept and internalize the costs of climate change, and policymakers to take into account the distributional effects of their economic policies across their populations. This will help to create the transition we need for a sustainable path to a net-zero economy by 2050.”
Global GDP growth is expected to remain high in 2021, at 5.6 percent, before dropping to 4.1 percent in 2022 and 3 percent in 2023, according to the report. According to the Swiss Re Institute, the biggest near-term macro risk is inflation, which is fueled by the oil crisis and long-term supply-side difficulties. Price pressure is projected to be highest in emerging nations, as well as the United Kingdom and the United States.
Resilience of the Insurance Sector
Global non-life premiums are expected to rise by 3.3 percent in 2021, 3.7 percent in 2022, and 3.3 percent in 2023, according to the Swiss Re Institute. After a year of above-average losses, property-catastrophe rates are expected to recover in 2022. Casualty rates are expected to rise in 2022 as a result of continuous social inflation, while personal lines may gain from early signs of improving automobile pricing in the United States and Europe, according to the report. The development of the US economy and consistent advanced market demand are likely to push up global health and medical insurance rates.
Emerging market expansion is also likely to be significant, with China expected to increase by 10% in each of the next two years, according to the Swiss Re Institute.
Premiums are expected to climb by 3.5 percent in 2021, 2.9 percent in 2022, and 2.7 percent in 2023 globally. Higher risk awareness, a recovery in group business, and increasing digital engagement are projected to promote robust demand for protection-type products.
According to the survey, increased risk awareness is driving demand for more insurance cover. The pandemic shock has brought attention to the need for insurance as a risk absorber in times of disaster, offering financial relief to individuals, businesses, and governments. However, supply-chain breakdowns demonstrate that more protection is still required, according to the Swiss Re Institute.