Swiss Re bullish on premium growth as demand for insurance protection surges

Heightened risk trends will increase the need for insurance protection, but also require a greater focus on evaluating and modelling, and ensuring pricing is adequate for the risks taken, according to analysts at global reinsurer  Swiss Re.

Ahead of the Rendez-Vous de Septembre 2021, Swiss Re shared its view on the state of the market and possible implications for the renewals season. A key discussion point for re/insurers in the current environment will be heightened risks, driven by longer-term trends and their implications, it said.

The reinsurer expects insurance market premium growth to continue, driven by increased exposures, risk awareness and evolving client needs. According to the Swiss Re Institute, non-life insurance premiums are expected to be 10 percent higher than the pre-COVID-19 level by the end of 2021.

Moses Ojeisekhoba (pictured), Swiss Re’s chief executive officer of reinsurance stated: "There is a clear recognition that claims’ frequency and severity is rising as demonstrated by recent natural catastrophes or cyber incidents. This means the need for protection is growing, and the industry has important work to do in offering insurance and closing the protection gap.”

The report also noted that climate change poses the biggest long-term threat to the global economy. The world economy is set to lose up to 18 percent of gross domestic product from climate change by 2050 if no mitigating actions are taken, it warned. Especially the risks from secondary perils, such as floods or wildfires, are growing, also driven by urbanisation, exposing ever larger communities and assets to extreme climate events. Increased digitalisation and interconnectedness are adding to the current risk landscape, for example in the area of cyber protection, said Swiss Re.

Consequently, there is a greater need for insurance protection translating into a positive outlook for premiums as these will need to reflect increased exposures. According to the Swiss Re Institute, non-life insurance premiums are expected to rise 10 percent above the pre-COVID-19 level by the end of 2021 to $6.9 trillion and surpass $7 trillion in 2022 for the first time ever.

While climate change is a real threat, it also poses the largest growth opportunity to the industry as major investments will be necessary, the reinsurer noted. In order to achieve the 2030 agenda for global sustainable development, investments in the order of $6.9 trillion a year will be required.

Re/insurers also need to prepare for elevated inflation risks, the report warned. Consumer price inflation pressure is expected to remain high in the near term and medical and wage inflationary pressures, which are particularly relevant for non-life claims inflation, are expected to build up in the medium term. In addition, the social inflation trend in the US is likely to continue, driven by a litigious environment. Pricing must reflect these trends and anticipate higher claims activity.

Thierry Léger, Swiss Re’s group chief underwriting officer, said: "As the risk landscape evolves and risks become more complex, there needs to be an even greater focus on evaluating and modelling these risk trends and ensuring pricing is adequate for the risks taken. Therefore, the importance of underwriting capabilities is further increasing, all the more given the persistent low interest rate environment. Accordingly, at Swiss Re we continue to focus on scientific, technology- and data-driven underwriting approach.”

Ojeisekhoba highlighted that Swiss Re is "best positioned to help our clients maximise value while driving measurable impact. This way, we collectively unlock new business models across the industry, push the boundaries of insurance and reduce protection gaps.”

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