Global insurance premium may rise by 3.3% to $6.9 trillion in 2021 : Swiss Re
Said Jerome Haegeli, Group Chief Economist at Swiss Re Institute,”We expect the insurance industry to earn a record $ 7 trillion in premium by end of next year. The economic upswing expected in 2021 and 2022 is on track to materialise, and this is a key factor for insurance premium growth across the globe. The main market to watch is China, where both economic and premium growth continue at a strong pace. Consumer awareness is clearly an important growth driver and this has been driven by the pandemic. Whether it is private medical insurance or supply chain interruption for businesses, people have become much more aware of what insurance is, and how it can help them to emerge resilient from such a crisis
Swiss Re's latest Sigma report on ``annual world insurance premium in 2021 '' has forecast that global insurance premiums are set to follow its strong economic growth, increasing by an expected 3.3% in 2021 to a total of USD 6.9 trillion.
The report also forecasts 3.9% insurance premium growth for 2022.
In 2021, key market insurance premium growth is forecast at 6.3% for China, 1.7% for the US, 2.8% in Western Europe and 5.6% for emerging markets.
The strong global economic recovery from COVID-19 will lead to historically high global real gross domestic product (GDP) growth of 5.8% in 2021, said the report.
The swift deployment of vaccines and large-scale fiscal stimulus, including unprecedented direct transfers to households and businesses, are fuelling a stronger economic
bounceback in 2021 than we had projected last year.
``We forecast historically high global real gross domestic product (GDP) growth of 5.8% in 2021 after a 3.7% contraction in 2020. This reflects robust growth in the US (6.5%) and China (8.3%),driven by services consumption.However, uncertainty around the emergence of more transmissible COVID-19 variants and the ability of vaccines to keep the pandemic under control suggests that the recovery may be more uneven and protracted than our base-case forecasts,'' added the report.
Said Jerome Haegeli, Group Chief Economist at Swiss Re Institute,”We expect the insurance industry to earn a record $ 7 trillion in premium by end of next year. The best preparation for the next economic shock is having economic buffers in place. However, fiscal and monetary buffers are being depleted, which means the private insurance sector is increasingly important. Narrowing protection gaps needs to become an economic policy goal.”
”The economic upswing expected in 2021 and 2022 is on track to materialise, and this is a key factor for insurance premium growth across the globe. The main market to watch is China, where both economic and premium growth continue at a strong pace. Consumer awareness is clearly an important growth driver and this has been driven by the pandemic. Whether it is private medical insurance or supply chain interruption for businesses, people have become much more aware of what insurance is, and how it can help them to emerge resilient from such a crisis,” commented Jerome Haegeli
John Chen, President of Swiss Re China,“The Chinese economic bounce-back will drive the recovery of the world economy and boost the development of the insurance industry in China, which will further improve the societal resilience and enable the high-quality development of both the insurance industry and the Chinese economy. The 14th Five-Year Plan and other ambitious goals have outlined great growth opportunities and space for innovation. The carbon neutrality target is another key driver that enables the insurance industry to contribute more to the sustainable development of the economy. Swiss Re will continue to work with our partners and clients to close protection gaps and build societal resilience.”
Insurance demand will benefit from the growth momentum, but a firmer inflation environment is a concern. Policymaking will soon turn to fiscal consolidation, but we believe optimal policy must take a longterm view in areas such as digitisation, climate change and income inequality.
``Global insurance demand will grow by an above-trend 3.3% in 2021 and 3.9% in 2022, we forecast, a much faster rebound than from the global financial crisis (GFC) of 2008–09. The economic recovery and the strongest rate hardening for 20 years in non-life insurance commercial lines will push premiums 10% above pre-COVID19-crisis levels this year and lift the global insurance market to more than USD 7 trillion by the end of 2022.
In 2020, global real premiums fell 1.3%, about a third of the drop in GDP.
As expected, premiums held up better in emerging markets (+0.8%) than advanced (‒1.8%), largely due to the strength of China (3.6%).
The pandemic has cemented positive paradigm shifts for insurance. One is a significant rise in risk awareness as a strong demand driver.
Global health and protection-type insurance premiums grew by 1.9% and 1.7%, respectively in 2020 despite social distancing affecting distribution.
``Our consumer survey in AsiaPacific markets in early 2021 found that many feel under-insured and aim to buy more protection, despite an already high rate of ownership. For companies too, pandemic-driven disruption has heightened awareness of supply chain and cyber risks,'' explainedthe report..
A second shift is the acceleration in demand to transact online. Insurers need to offer digital engagement at all touchpoints as they compete with new, nontraditional players entering the consumer insurance market.Inflation is a key medium-term risk in non-life insurance, emphasised the report.
``We expect non-life premium volumes to grow 2.8% this year after 1.5% expansion in 2020, as strong price increases in commercial lines remain the dominant tailwind. Personal lines growth and profitability will be softer, as motor undergoes competitive pressure and a return to normal claims after an extraordinarily profitable 2020. We do not expect current,
transient pandemic-driven inflation spikes to have a big impact on insurers.
However,longer-term tolerance of inflation by governments and central banks as they prioritise progressive policies is a risk, particularly for longer-tail liabilities exposed to rising
``We expect stable non-life insurance underwriting profitability as rate uplifts in commercial lines offset higher claims in US liability and global motor.We expect a strong recovery in global life insurance premiums to above-trend growth of 3.8% in 2021 and 4.0% in 2022, benefiting from the COVID-19 effect on consumer risk awareness,'' .
This should fuel rising demand for risk protection insurance, while life savings business should benefit from stronger financial markets and a steady recovery in consumer incomes. Total global life premiums are expected to exceed USD 3 trillion this year, primarily written in advanced markets given their larger global share.
The market contracted 4.4% in real terms in 2020 due to weakness in life savings business, which represents 81% of the global life portfolio.
``We expect moderate improvement in life sector profitability to pre-pandemic levels this year, with recovery across all lines of business,'' said the report.