Global insurance growth may pick up to 1.7% in ‘24: Swiss Re Institute

The global insurance industry should grow by 1.1% in 2023 to a record high premium tally of $7.1 trillion, then tack on another 1.7% the following year, with non-life leading the way this year at 1.4% growth, analysts at the  Swiss Re Institute have declared.

The industry growth rate is well below the 10-year trend of 2.6%, but a welcome reprieve from the 1.1% market erosion suffered in 2022 as the life segment shrank. Non-life is picking up from a fractional 0.5% gain in 2022.

“This improvement will be largely due to rate hardening in personal and ongoing price strength in commercial lines,” analysts wrote of the non-life gains. Motor can rebound from three years of contraction, also on rising rates. A post-pandemic decline in health may take the edge off those gains.

Inflation is a blessing and a challenge short-term, but eventual disinflation may herald a period of notable margins. “Both the slowdown and inflation raise challenges for insurers, but we believe the industry will be resilient over the next two years.”

“With inflation pressure persistent, hard market conditions in non-life are set to continue as insurers offset elevated claims costs with higher premium prices” analysts wrote. “Lower claims once disinflation does take hold, and higher returns on interest rate-sensitive investments, should support profitability.”

The upshot: a rebound in non-life sector return on equity (ROE) to 7.8% in 2023 from 3.4% the year prior, on its way to 9.3% in 2024, even as the cost of capital rises with the stronger investment return.

Swiss Re Institute likewise calls the profit outlook for life insurance “positive” with improved investment earnings, reduced Covid-related claims, a de-risking of pension and annuity premiums and an earnings smoothing from IFRS17 all lending a hand.

In life, the share of risk business in the global life insurance sector should stabilise at 23% by 2028, up from 22.3% in 2022, Swiss Re Institute claimed. Global risk premiums will grow by an estimated 1.7% in 2023, below the 4.2% long-term CAGR rate.

Not all gains will go straight to the bottom line and reserve adequacy may prove to be a key question. “Despite a historically large cushion for incurred but not reported claims, a greater focus on reserve adequacy may be needed.”

Swiss Re Institute built its outlook on a forecast for global growth of 2.3% this year and next in real terms, both projections below consensus as policymakers are expected to err on the side of caution on the question of inflation.

Emerging markets will outpace core markets by a 3.3x pace, up from the 2.2x average of the past two decades, Swiss Re Institute believes. Amongst core markets, growth in the US will continue to outpace the euro area.

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