Non-life hard market expected to continue over 2024 and 2025, as inflation and rising claims costs push rates higher, according to The Swiss Re Institute.
The Swiss Re Institute’s annual World Insurance sigma report finds that the global economy has remained remarkably resilient, despite geopolitical tensions and higher inflation causing economic concerns.
Instead, a “robust” economic outlook sets the scene for growth and improved profitability across the insurance industry, the reinsurer’s research unit has observed.
Three positive trends in brief:
- Major economies are more resilient than expected, with global GDP growth forecast at 2.7% in real terms in 2024
- Non-life hard market expected to continue over 2024 and 2025 as inflation and rising claims costs push rates higher
- Higher interest rates to boost both growth and profitability for life insurance business in 2024
“The insurance industry has reached a new equilibrium after the challenges of recent years,” said Jérôme Haegeli, Swiss Re’s group chief economist.
“The global economy has surprised on the upside, which should drive more demand for insurance. The life sector in particular is one to watch as higher interest rates drive investment income and consumer demand for annuities, giving more people secure retirement incomes,” he added.
Outlook for 2025
Swiss Re Institute estimates that global gross domestic product (GDP) will grow by 2.7% in real terms in 2024, the same as 2023.
This “resilient growth” is expected to continue into 2025 at 2.8% in real terms, the reinsurer said.
While the overall outlook is positive, regions are on different trajectories, with the US forecast to grow at 2.5% in 2024, while the euro area is expected to show below-trend growth of 0.7%.
The trend to global disinflation continues, the sigma study reported, but returning to target inflation levels is unlikely to be a smooth journey.
In the US, inflation is expected to return to target in 2025, due to higher-than-anticipated core services prices. Europe is already near its target inflation levels, driven by a fall in energy prices in 2023, softer core prices and an expected deceleration in wage growth, the report said.
Rising non-life profits
Due to inflation and the resulting rise in claims costs, non-life insurers have increased rates over recent years.
Swiss Re Institute sees higher prices continuing for personal lines in 2024, moderating into 2025.
For commercial lines, though still positive, rate increases have decelerated with some markets starting to soften.
Overall, non-life premium volume is forecast to build on the 3.9% growth achieved in 2023, reaching $4.6trn in 2024 and $4.8trn in 2025.
Property and casualty insurers are expected to improve profitability in 2024, with industry-wide return on equity (RoE) across eight major markets at 10% so far this year, up from 6% in 2023.
Swiss Re said an RoE of above 10% is forecast into 2025.
“Commercial insurance accounts for almost half of the total property and casualty market,” said Kera McDonald, chief underwriting officer of Swiss Re Corporate Solutions.
“We expect commercial P&C carriers to maintain profitability in 2024, as rate trends have enabled lines like property to stay sustainably priced.
“The industry has seen single-digit rate increases for property business written this year. On the casualty side, we observe a trend of general market softening across most long tail lines,” McDonald added.
Ranking of insurance markets by total premium pool
| Rank | Country | Total premium volume | Market Share | ||
|---|---|---|---|---|---|
|
2023* |
2024e |
2025f |
2023e |
||
|
1 |
United States |
3,227 |
3,424 |
3,584 |
44.9% |
|
2 |
China |
724 |
812 |
893 |
10.1% |
|
3 |
United Kingdom |
375 |
401 |
420 |
5.2% |
|
4 |
Japan |
363 |
370 |
382 |
5.0% |
|
5 |
France |
283 |
292 |
303 |
3.9% |
|
6 |
Germany |
245 |
255 |
264 |
3.4% |
|
7 |
South Korea |
186 |
194 |
205 |
2.6% |
|
8 |
Canada |
171 |
176 |
185 |
2.4% |
|
9 |
Italy |
159 |
165 |
171 |
2.2% |
|
10 |
India |
136 |
149 |
162 |
1.9% |
|
11 |
Netherlands |
93 |
98 |
102 |
1.3% |
|
12 |
Brazil |
84 |
92 |
98 |
1.2% |
|
13 |
Spain |
83 |
88 |
92 |
1.2% |
|
14 |
Taiwan |
78 |
80 |
84 |
1.1% |
|
15 |
Australia |
74 |
76 |
79 |
1.0% |
|
16 |
Hong Kong |
66 |
70 |
75 |
0.9% |
|
17 |
Switzerland |
61 |
63 |
65 |
0.9% |
|
18 |
Mexico |
45 |
50 |
54 |
0.6% |
|
19 |
Denmark |
44 |
47 |
51 |
0.6% |
|
20 |
Sweden |
44 |
45 |
48 |
0.6% |
“e”=estimated, “f”= forecast
*Data for 2023 is provisional for Canada, Switzerland, Hong Kong. Data for 2023 is estimated for US, UK, Japan, France, Germany, South Korea, Italy, India, Netherlands, Brazil, Spain, Australia, Denmark and Sweden.
Chart source: Swiss Re Institute
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