Global insurance premium growth up 2015, but outlook is mixed

Global insurance premium growth accelerated in 2015 compared with 2014, but profitability of the sector is set to remain under pressure in a mixed growth outlook, according to the latest Swiss Re Sigma report.

In 2015, global insurance premium growth increased by 3.8 percent year on year compared with 3.5 percent growth registered in 2014, despite only moderate global economic growth.
Global premium in the life sector slowed to 4 percent from 4.3 percent in 2014 driven by advanced markets.

At the same time, the non-life segment registered strong growth in Asia and improvements in North America and Western Europe, driving global premiums in the segment up 3.6 percent year over year in 2015 compared to 2.4 percent in the previous year.

Low interest rates in the advanced economies are pressuring profitability in the life segment and, to a lesser extent, in the non-life sector. Moderate premium growth in the life sector in many markets additionally pressured profits. In the non-life sector, both underwriting and investment results deteriorated. The underwriting result was hit by lower reserve releases while low interest rates impacted investment results.

"Interest rates and the macroeconomic and financial market environments will continue to shape the outlook for the insurance industry," Kurt Karl, chief economist at Swiss Re, said. "With profitability under pressure, life insurers will continue to focus on improving capital management, lowering expenses and enhancing investment yields. Profitability in non-life will also remain subdued on still-low investment returns and soft pricing conditions."

On a positive note, the insurance industry overall remains well capitalised, suggesting that insurers are prepared to endure periods of economic or market turmoil.

In the life sector, a recovery in Oceania and Western Europe is set to result in a slight increase in life premium growth in advanced markets in 2016. In emerging markets, however, growth in the life sector is set to slow down while remaining strong, driven by emerging Asia.

Moderate economic activity and soft pricing is set to weaken growth in the global non-life sector in 2016. In emerging Asia, however, growth in the non-life sector is expected to be strong.