Next year will see global non-life insurance premium rates continue to rise at a moderate pace while life premium rates return to growth after not growing this year, Swiss Re said yesterday.
In its Global re/insurance review 2012 and outlook 2013/14, the reinsurer forecast a slight improvement in global economic activity next year as a result of an improving housing market in the US, fiscal and monetary stimulus in China and a slow improvement in the eurozone.
A combination of this and a slight rise in prices will mean non-life direct premiums increase by 3% in real terms, it said, much of which will be fuelled by an 8% growth in premiums in emerging markets.
This year has seen underwriting results improve compared to 2011 which saw high catastrophe losses, while rates were either stable or 'slightly up' this year. Swiss Re said this was not enough to compensate for decreasing investment yields and next year is expected to see insurers' reserves dry up, prompting a 'stronger pace' in price increases.
Thomas Holzeu, one of the report's authors, said: 'The expected price increases in the casualty lines will likely be gradual due to the weak economic environment and fierce competition.'
Swiss Re expects developments in the reinsurance sector to follow the primary insurance sector closely - albeit with profits slightly lower this year due to it being a higher-than-average year for catastrophe losses.
It noted, however, that this assumption was based on the estimates for losses from Hurricane Sandy being in line with forecasts made so far by catastrophe modellers.
Emerging market premium growth is expected to contribute to a 2% increase in life insurance premiums next year, after this year saw primary life premiums grow by close to zero.
Advanced markets including the US, Canada and Australia will also have positive real premium growth as stronger economic activity and rising interest rates help them to rebound from a decline in premiums this year.
'Profitability will remain constrained, however, because investment yields will continue to decline as bonds mature and must be replaced with lower yielding assets,' the report said. 'Also, regulatory changes are expected to have a greater impact on life insurance business.'