World insurance coverage business might hit new file in 2022
The trends that shape the insurance markets include climate change and digitization. Rapid decarbonization is becoming increasingly important, and the approach that societies take in transitioning to a green economy will determine their economic prospects, the Swiss Re Institute said. The insurance industry can support this transition by both absorbing disaster damage and promoting sustainable infrastructure investments.
The adoption of digital technologies plays an important role in driving global productivity growth, and the pandemic has increased customer receptivity to digitally interacting with insurers, the study found.
Another major trend is the increasing divergence in countries’ growth and socio-economic indicators such as inequality – a potential downside risk, the Swiss Re Institute said.
“The economic recovery we are experiencing is cyclical, not structural, with macroeconomic resilience weaker today than it was before the COVID-19 crisis. So we shouldn’t be complacent, ”said Jerome Haegeli, Chief Economist of the Swiss Re Group. “Given their ability and expertise to absorb risk, the insurance industry is vital to making societies and economies more resilient. However, everyone has to be on board for inclusive and sustainable growth. Green growth is only sustainable if it is inclusive. We have a unique opportunity to build a better market system. To this end, all actors have to accept and internalize the costs of climate change and political decision-makers have to consider the distributional effects of their economic policy on their populations. This will help create the transition we need for a sustainable path to a net-zero economy by 2050. “
The study forecast that global GDP growth would be strong at 5.6% in 2021 and slow to 4.1% in 2022 and 3% in 2023. Inflation is the main short-term macro risk, fueled by the energy crisis and ongoing supply-side problems. The Swiss Re Institute said. Price pressures are likely to be strongest in emerging markets as well as in the UK and the US.
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Insurance industry resilience
The Swiss Re Institute forecast that global non-life premiums will grow 3.3% in 2021, 3.7% in 2022 and 3.3% in 2023. After a year with above-average damage, property damage rates will improve in 2022. Accident rates are likely to be higher in 2022 due to ongoing social inflation, while residential customers could benefit from early signs of improvement in car prices in the US and Europe, the study said. Health and health insurance premiums are expected to rise worldwide, driven by the growth of the US economy and stable market demand. Strong expansion is also expected in emerging markets, with China forecasting 10% growth over the next two years, the Swiss Re Institute said.
Global life insurance premiums are expected to increase by 3.5% in 2021, 2.9% in 2022 and 2.7% in 2023. There is likely to be strong demand for products of this type of protection, driven by increased risk awareness, a recovery in group business and increased digital interaction.
The increasing risk awareness is fueling the demand for more insurance protection, according to the study. The pandemic shock has highlighted the role of insurance as a risk absorber in times of crisis by providing financial relief to individuals, businesses and governments. However, disruptions in the supply chain show that better protection is still needed, the Swiss Re Institute said.
“The market conditions indicate that the positive price dynamics will continue across all lines and regions,” said Haegeli. “A higher claims development due to inflation in all lines of business, persistent social inflation in the USA and persistently low interest rates will be the main factors behind the hardening of the market.”