Heightened risk awareness following the COVID-19 pandemic will help drive the value of global insurance premiums above $7trn (£5.2trn) for the first time next year, Swiss Re has forecast.
The reinsurance giant's latest sigma study suggests that insurance premiums will grow by 3.4% in real terms this year, and by 3.3% and 3.1% in 2022 and 2023, respectively.
This will see premium value exceed $7trn in mid-2022 amid increasing demand for protection and rate hardening within non-life insurance commercial lines.
The outlook is also supported by a strong cyclical recovery from COVID-19, although economic growth is expected to slow in the next two years due to an unfolding energy price crisis, prolonged supply-side issues, and inflation risks.
Global GDP growth is forecast to reach 5.6% this year, slowing to 4.1% in 2022, and 3.0% in 2023.
“The economic recovery we are experiencing is cyclical and not structural, with macroeconomic resilience weaker today than before the COVID-19 crisis,” said Jerome Haegeli, Swiss Re Group chief economist.
“As such, we should be anything but complacent. Given its capacity and expertise to absorb risks, the insurance industry is crucial in making societies and economies more resilient.”
The study forecasts global non-life premiums to grow by 3.3% in 2021, 3.7% in 2022 and 3.3% in 2023, and life premiums to increase by 3.5% in 2021, 2.9% in 2022 and 2.7% in 2023.
It also outlines how climate change and digitalisation are significant trends shaping the world economy and insurance markets, with societies' approach to transitioning to a green economy set to determine the economic outlook.
The insurance industry can support the transition to a low-carbon economy, not only by absorbing disaster losses, but also by promoting sustainable infrastructure investments that help mitigate the impact of volatile extreme weather.
“Yet for inclusive and sustainable growth, everyone must be on board,” Haegeli continued. “Green growth is sustainable only if it is also inclusive. We have a unique opportunity to build a better market system.
“For this, all stakeholders will need to accept and internalise the costs of climate change, and policymakers to take into account the distributional effects of their economic policies across their populations.
“This will help to create the transition we need for a sustainable path to a net-zero economy by 2050.”
Image credit: iStock
Author: Chris Seekings