Non-life hard market to continue, especially in property: Swiss Re

The global insurance market is expected to continue experiencing a hard market in non-life risks through the rest of this year at least, with property risks an area of particular focus and also growth as premiums should continue to expand, Swiss Re has said.

Reporting on global insurance market conditions today in a new sigma report, reinsurance firm Swiss Re singles out non-life and property risks as areas of particular promise, going forwards.

Overall, global insurance premiums (non-life and life) are forecast to grow by 1.1% in 2023 and by 1.7% in 2024, despite any economic slowdown that occurs, Swiss Re estimates.

Supporting industry profitability will be three factors, rate hardening in property & casualty risks, improved combined ratios and stronger investment returns due to higher interest rates, Swiss Re said.

“With inflation pressures still persistent, hard market conditions in non-life business are set to continue as insurers offset elevated claims costs with higher premium prices,” explained Jérôme Haegeli, Swiss Re’s Group Chief Economist.

“Once disinflation takes hold with prices decreasing, less expensive claims and greater returns from interest rate-sensitive investments should further support industry profitability,” Haegeli continued.

Swiss Re anticipates global insurance market profitability increasing, which bodes well for reinsurance and insurance-linked securities (ILS) interests.

Growth is a key driver, with global insurance premium volumes expected to total a new peak of US $7.1 trillion in 2023, compared to US $6.8 trillion in 2022.

The Asian market will be a key area of growth, with non-life premiums expected to expand by 6.7% and 6.2% over 2023 and 2024, while life premiums are set to grow by 5.0% and 5.4%.

The US remains most important though and ground-zero for risk-linked investments, as Swiss Re highlights that total premiums neared US $3 trillion in 2022 in the United States, while the US share of the global market rose from 40% to 44%, driven by strong premium growth in nominal terms (8.6%) and US dollar appreciation.

The growth in premiums anticipated is one thing, but Swiss Re warns that inflationary effects will continue to impact claims.

Construction costs in the US were estimated to have risen by 17.5% in 2022, and are forecast to continue rising by 11% over this year.

Swiss Re anticipates an improvement in property, as claims inflation subsides somewhat. But it seems likely the costs will continue to rise overall, suggesting an increasing need for reinsurance capital, alongside the premium growth forecast.