Global insurance premiums will grow 3 percent on average over the next two years even with an emerging global economic slowdown, Swiss Re said in its latest sigma report.
Rising loss costs will fuel the moderate but steady increase, the reinsurer said.
“Pricing in non-life has strengthened, driven by rising loss costs in property catastrophe and U.S. casualty, and we expect this to continue,” Swiss Re said in its report.
The reinsurer added it sees low interest rates as another factor, creating continued pressure on insurers “to drive technical profitability, particularly in long-tail lines.”
The emerging market in Asia, and China in particular, will drive global insurance premium growth, according to the report.
China will propel a 9 percent jump in property/casualty premiums and 11 percent in life premiums for 2020, Swiss Re said, with China making up 60 percent of all additional premiums in Asia over the next decade. Non-motor personal lines and medical and health insurance will create expanding risk pools, with 14 percent annual premium growth, the report noted.
While small increases in global premium will take place overall, Swiss Re sees a global slowdown in economic growth taking hold. The reinsurer predicts growth of 1.6 percent and 0.9 percent, respectively, for the U.S. and Europe in 2020. Swiss Re said it sees a European slowdown particularly likely, “with low levels of productivity and technical innovation and an aging population.”
Asia, on the other hand, will chug along, with Swiss Re envisioning nearly 6 percent growth in India and China in 2020.
Should recession hit, Swiss Re said that property/casualty insurers would take a hit, particularly those made vulnerable by global trade conflicts now underway.
Marine and trade credit insurance would be hit hardest, Swiss Re said.
On the other hand, a recession could benefit lines of business such as casualty, which can do well with reduced claims severity due to economic factors such as slowdowns in wage inflation and medical expense hikes.
Swiss Re hasn’t forgotten social inflation – the impact of changes in the tort system through which most liability claims are settled. This trend is putting upward pressure on loss costs, particularly U.S. liability and also propel higher rates, according to the reinsurer.
Source: Swiss Re