Global insurance premiums to rebound in 2021 on continued rate hardening: Swiss Re

Global insurance market growth is set to rebound strongly in 2021 after contracting this year due to the wide-ranging impacts of COVID-19 pandemic, but the recovery will be slow and uneven, according to Swiss Re.

Recent analysis by Swiss Re Institute forecasts a premium growth of 3.4 percent in real terms in 2021, and 3.3 percent in 2022, supported by continued rate hardening.

The study also finds that the global insurance markets have been less severely impacted than previously expected amid the economic shock inflicted by COVID-19. Total premium volumes in 2020 are estimated to decline by 1.4 percent in real terms, less than the earlier anticipated 2.8 percent drop.

“Market conditions from both the demand and supply sides point to continued pricing strength," according to Andreas Berger, chief executive officer of Swiss Re Corporate Solutions. “The low interest rate environment and the ongoing social inflation in the US will be key drivers of market hardening."

Swiss Re noted that the upswing has broadened across commercial lines of business and in almost all regions. Casualty business, which had remained soft until 2018, has also started to improve this year, notably in the US and Europe.

The reinsurer expects rate hardening to continue through 2021.

Furthermore, Swiss Re Institute estimates that global non-life premiums will grow by 1.1 percent this year and recover to an average annual 3.6 percent growth in 2021 and 2022. Volumes are expected to already be back above pre-pandemic levels by the end of next year.

Advanced market non-life premiums are forecast to grow by close to 3 percent in both 2021 and 2022, led by advanced Asia and the US, where a hard market in commercial insurance will boost premiums.

China will remain the fastest growing market with premiums up an estimated 10 percent annually over the next two years. Other emerging markets will see aggregate premium growth of nearly 4 percent annually.

In the life market, Swiss Re predicts a swift return to 3 percent growth in 2021 on the back of economic recovery. The rebound will be led by the emerging markets, primarily emerging Asia, with premiums forecast to increase by 6.9 percent in 2021, and by 8.5 percent in China.

Swiss Re further noted that the insurance industry can contribute to more inclusive growth by broadening its digital reach, use of data analytics, and public-private partnerships.

“For sustainable economic recovery, we need a policy reset. Public policy should focus on areas such as infrastructure, technology and climate. Building new sustainable infrastructure will have a significant impact on GDP growth," said Jerome Jean Haegeli, Swiss Re's chief economist.

“In addition to smarter spending, policymakers should make more use of public-private partnerships and establish the operational and regulatory frameworks to enable greater participation of private-sector finance, including insurers’ assets, in the real economy," Haegeli said.