Advanced markets are set to drive significant growth in global insurance premiums over the next decade, despite ongoing geopolitical tensions and inflationary pressures. By 2034, these regions are projected to account for half of all new insurance premiums. This growth is expected to be fueled by increased premium and investment income, which will enhance profitability in the life insurance sector by 15% in 2024.
Jérôme Haegeli, Group Chief Economist at Swiss Re, commented, “The insurance industry has stabilized after recent disruptions. The global economy’s unexpected positive performance is likely to spur greater demand for insurance, particularly in the life sector. Higher interest rates are driving investment income and consumer interest in annuities, which will help secure retirement incomes for many.”
Swiss Re Institute forecasts global GDP growth to remain steady at 2.7% in real terms for 2024, matching the previous year’s growth, with a slight increase to 2.8% anticipated for 2025. The United States is expected to grow by 2.5% in 2024, whereas the euro area will experience a more modest growth rate of 0.7%, according to the institute’s annual World Insurance Sigma 2024 report.
Disinflationary trends are continuing, although the return to target inflation rates may be uneven. The US is projected to meet its inflation target by 2025, while Europe is approaching its target due to declining energy prices, softer core inflation, and slower wage growth.
In the non-life insurance sector, profitability is predicted to rise. After increases in rates driven by inflation-related claims costs, the Swiss Re Institute anticipates that personal lines rates will remain high in 2024 but will moderate in 2025. Commercial lines will experience slower rate increases and some market softening. Non-life premium volume is expected to grow from $4.6 trillion in 2024 to $4.8 trillion in 2025, following a 3.9% growth in 2023.
Kera McDonald, Chief Underwriting Officer at Swiss Re Corporate Solutions, foresees continued profitability in commercial insurance with ongoing single-digit rate increases for property. However, the casualty markets are experiencing general softening. Property and casualty insurers are expected to see enhanced profitability in 2024, with the industry’s return on equity (ROE) rising to 10% from 6% in 2023, and maintaining above 10% into 2025.
The life insurance sector is benefiting from higher interest rates, with Swiss Re Institute projecting a 2.9% increase in premiums, reaching $3.0 trillion by the end of 2024, and a 2.7% growth in 2025. Both Western Europe and advanced Asia-Pacific (APAC) are expected to witness strong growth. Notably, annuity sales surged by 63% in 2022 and 36% in 2023 in the US.
