Swiss Re Institute: Robust Economies Set to Drive Insurance Growth and Profitability
Geopolitical tensions and higher inflation have led to economic concern in recent years. Swiss Re Institute’s annual World Insurance sigma report finds that the global economy has remained remarkably resilient, setting the scene for growth and improved profitability across the insurance industry.
Jérôme Haegeli, Swiss Re’s Group Chief Economist says: “The insurance industry has reached a new equilibrium after the challenges of recent years. 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.”
Continuing global growth for 2024 and 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. 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. However, 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.
Profitability for non-life insurance expected to improve
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 USD 4.6 trillion in 2024 and USD 4.8 trillion in 2025.
Kera McDonald, Chief Underwriting Officer Swiss Re Corporate Solutions says: “Commercial insurance accounts for almost half of the total property and casualty market. 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.”
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. ROE of above 10% is forecast into 2025.
Life insurance boom on the back of higher interest rates
The life insurance industry is facing a double benefit from the higher interest rate environment, with both top-line growth and improved profitability. Swiss Re Institute forecasts 2.9% premium growth for the industry by the end of 2024, reaching a total premium pool of USD 3.0 trillion. Similar growth of 2.7% is expected in 2025. Strong rebounds in growth should be visible in many key markets, with Western Europe and advanced APAC returning to premium growth.
A significant growth area for life insurance is the uptake of annuities to boost retirement savings. In the US, for example, sales of fixed-rate annuities jumped 63% in 2022 and 36% in 2023. Longer term, advanced markets are expected to contribute half of all additional premiums over the next 10 years, driven by strong growth in annuities.
For 2024, Swiss Re Institute forecasts that the combination of increased premium and increased investment income will boost profitability in the life sector, with the operating results across eight top markets increasing 15% for the year.
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.
