Life insurers, in particular, will benefit from higher interest rates. However, the overall outlook for the entire industry is also favorable, according to Swiss Re, one of the world's leading reinsurers, in its Sigma report.
Despite geopolitical tensions and higher inflation, the global economy has proven remarkably resilient, creating favorable conditions for the insurance industry to expand its premium volume and increase profitability. This positive outlook for the industry is noted in the latest Sigma report from the Swiss Re Institute.
The reinsurer's economists anticipate that the global economy will grow by 2.7 percent in real terms in 2024 and by 2.8 percent in 2025. This benefits the entire insurance industry, but especially the life insurance sector due to a special factor. Jérôme Haegeli, Group Chief Economist at Swiss Re, stated: «Higher interest rates drive up capital returns and consumer demand for annuities, allowing more people to enjoy secure retirement provisions.»
Higher Premiums, Better Profitability
For life insurers, premium growth of 2.9 percent to $3 trillion is expected in 2024, with a 2.7 percent increase projected for 2025. The Swiss Re Institute forecasts that the combination of higher premiums and higher capital returns in 2024 will lead to greater profitability, with operating income in the eight largest markets expected to improve by 15 percent.
The outlook is also favorable for the non-life insurance sector (property and casualty insurance). The trend toward higher premiums will continue this year and is expected to level off in 2025. Premium volume is projected to rise from $4.6 trillion in 2024 to $4.8 trillion the following year.
US Market Dominance
Property and casualty insurers can also improve their profitability in 2024. The return on equity (in the eight largest markets), which was 6 percent last year, is expected to rise to 10 percent in 2024 and even higher in 2025.
The United States is by far the most important insurance market, accounting for 45 percent of total premium volume. The next three largest markets are China (10 percent), the United Kingdom, and Japan (each with 5 percent). Switzerland ranks 17th with a market share of 1 percent.
