Insurance market can grow above trend through 2023: Swiss Re

Global insurance demand will grow across most segments at a pace above the long-term trends through at least 2023 to beat off the impact of any lengthening peak in claims inflation, Jerome Haegeli (pictured), chief economist,  Swiss Re, told an online conference Wednesday.

“We expect above trend growth at 3 percent in both life and non-life,” Haegeli said.

Outlook for the insurance market looks “much better” than the economy as a whole, he said. The economy remains supportive with growth “past the peak … but still flying high.”

That growth comes as central banks have the world “driving well above the speed limit” leaving inflation as the top macro risk, Haegeli argued.

Add a post-pandemic rise in consumer risk awareness and new digital insurance platforms to the mix, and premium growth looks decisively above trend.

In advanced economies, non-life premiums growth will remain above trend at 2.8 percent in 2021 before settling in towards the longer-term average near 2.4 percent for 2022 and 2023, the Swiss Re executive noted.

But emerging markets, suffering a slump in growth rates this year to some 5.8 percent, will step back up to their leadership role with estimated annual growth rates at 8.2 percent over 2022-23. Emerging market growth at three times advanced economies, represents “a very strong engine,” Haegeli said.

Life segments are doing even better, with global growth of 3.5 percent in 2021 and average annual growth of 2.8 percent over 2022-3 showing “the most reshaped recovery ever” given trend growth rates closer to the 1 percent mark for the pre-pandemic 2016-2020 period, Haegeli said.

“Consumer risk aversion is a big part of what is driving the uptake in life insurance premiums,” he said.

Inflation is the top macro risk, with knock-on effects for pricing insurance claims. US inflation has yet to peak, expected above the 7 percent mark in early 2022 on its way to 5 percent for the full-year, according to the above-consensus Swiss Re view. The eurozone and China will only see some half that level of price growth next year. His US inflation forecast more than halves for 2023 and his eurozone forecast is back below ECB target.

“Inflation on the CPI [level] is staying higher for longer and that will keep claims inflation higher for longer,” Haegeli said, citing “economic forces, but not only.”

Add in a standard but unpredictable dose of social inflation into the US claims pricing picture, he warned. “It’s something we cannot, and should not, expect to go away.”

While shying away from specific forecasts for claims inflation, Haegeli does seem to point to figures below his forecast for overall market growth.

Profitability forces are improving going into 2022,” Haegeli said. “Even if you have higher claims inflation, you see higher insurance market prices: they are broadening across commercial lines.”

“[Inflation] is a drag, but it is also an uplift to insurance market prices [which], net to net, is very positive.”

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