Global reinsurance company, Swiss Re, has increased its forecasts for global insurance premium growth, based on foreseen acceleration and now forecasting the market will surpass $7 trillion in global premiums by mid-2022.
A few months ago, the company had projected that global insurance premiums would reach $7.2 trillion by the end of 2022, with a 2.9% growth rate for the year.
However, based on recent market developments, Swiss Re, has raised the earlier projection to 3.3% for 2022, thereby making it to conclude that the $7 trillion mark will be surpassed by mid-next year.
In its latest report on the prospect of the market, the company stated that as risk is value-at-risk expanding at the same time and it seems likely the global protection gap will continue growing while insurance premium growth is running at such low percentage rates.
Specifically, Swiss Re’s new forecast indicated that the global insurance premiums would grow by 3.4% in 2021, 3.3% in 2022 and 3.1% in 2023.
According to the company, the slowing rate of growth is indicative of an industry that likely isn’t keeping pace with global exposure and value-at-risk growth, indicating that it seems that protection gaps will continue to expand,.
But then, despite the slow growth rate, Swiss Re sees positive signs, believing that buyers of insurance are increasingly risk averse.
It further clarified: “Rising risk awareness is generating demand for more insurance protection. The pandemic shock has highlighted the important role the insurance industry plays as a risk absorber in times of crisis by providing financial relief to households, businesses and governments.
“At the same time, supply chain disruptions show that better protection is required to improve societal resilience and record-breaking weather extremes this year add urgency to the global race to net zero. Consumers also welcome digital and online insurance, and it is expected to grow rapidly.
“However, increasing inequality could exacerbate social inflation, which is defined as the increase in insurance claims driven by large litigation costs.”
Commenting on the research findings, Swiss Re Group Chief Economist, Jerome Haegeli , said: “Market conditions suggest that positive pricing momentum will continue across all lines and regions. Inflation-driven higher claims development in all lines of business, continued social inflation in the US and persistently low interest rates will be the main factors for market hardening.”
In addition, Swiss Re also projected that non-life insurance premiums would grow by 3.3% in 2021, 3.7% in 2022 and 3.3% in 2023, slightly faster than the average and that attaining the growth rate will be largely a function of price.
The company stated that comparing the rate of insurance premium growth with both inflation and exposure growth (value-at-risk) would be critical to identifying whether the world is actually becoming better protected by insurance and reinsurance capital, or whether more risk is uncovered as economies expand, with many modernising, constructing and building infrastructure at pace.
Swiss Re further reported that on top of physical value-at-risk though, there is also intangible in which insurance and reinsurance are really not keeping pace.
According to the company, the exposure from intangible risks, including contingent risks and interruptions, is expanding at great pace, while digital and cyber risk exposure is growing far faster than insurance premium growth, meaning more risk is uncovered and uninsured exposure rising.
Swiss Re maintained that while it’s extremely positive that insurance premium growth seems to be accelerating, alongside the world’s recovery from the peak of the COVID-19 pandemic, there remained a significant amount of work to do for the insurance and reinsurance industry to keep pace with exposures that are rising rapidly globally.
