Despite geopolitical tensions and heightened inflation in recent years, major economies have demonstrated unexpected resilience. According to Swiss Re Institute’s annual World Insurance sigma report, global GDP growth is forecasted to reach 2.7% in real terms in 2024, setting a promising stage for growth and increased profitability in the insurance sector.
The report anticipates that the non-life insurance market will remain in a hard market phase through 2024 and 2025. This continuation is driven by inflation and rising claims costs, which are pushing rates higher.
For the life insurance sector, higher interest rates are expected to fuel both growth and profitability in 2024. This boost comes as a welcome development for the industry, which has faced various challenges in the economic landscape.
Swiss Re Institute projects that global gross domestic product (GDP) will maintain a growth rate of 2.7% in real terms for 2024, matching the growth seen in 2023. This resilient trend is expected to persist into 2025, with an estimated increase of 2.8% in real terms. However, regional growth trajectories will vary, with the US forecasted to grow at 2.5% in 2024, while the euro area is expected to experience below-trend growth at 0.7%.
The global trend towards disinflation continues, but achieving target inflation levels may not be straightforward. In the US, inflation is expected to return to target levels by 2025, influenced by higher-than-anticipated core services prices. Europe is already nearing its target inflation levels, driven by a decrease in energy prices in 2023, softer core prices, and an expected slowdown in wage growth.
Improved Profitability for Non-Life Insurance Sector
Non-life insurers have raised rates in recent years due to inflation and rising claims costs. Swiss Re Institute predicts that higher prices for personal lines will continue into 2024, with moderation expected in 2025. In the commercial lines sector, although rate increases remain positive, some markets are beginning to soften. Overall, non-life premium volume is forecasted to build on the 3.9% growth achieved in 2023, reaching USD 4.6 trillion in 2024 and USD 4.8 trillion in 2025.
Jérôme Haegeli, Swiss Re’s Group Chief Economist said of the findings: “The insurance industry has reached a new equilibrium after the challenges of recent years. The global economy has surprised on the upside, which should drive more demand for insurance. The life sector in particular is one to watch as higher interest rates drive investment income and consumer demand for annuities, giving more people secure retirement incomes.”
Kera McDonald, Chief Underwriting Officer Swiss Re Corporate Solutions also commented, saying: “Commercial insurance accounts for almost half of the total property and casualty market. We expect commercial P&C carriers to maintain profitability in 2024, as rate trends have enabled lines like property to stay sustainably priced. The industry has seen single-digit rate increases for property business written this year. On the casualty side, we observe a trend of general market softening across most long tail lines.”
Property and casualty insurers are expected to improve profitability in 2024, with industry-wide return on equity (ROE) across eight major markets at 10% so far this year, up from 6% in 2023. ROE of above 10% is forecast into 2025.
Life insurance boom on the back of higher interest rates
The life insurance industry is facing a double benefit from the higher interest rate environment, with both top-line growth and improved profitability. Swiss Re Institute forecasts 2.9% premium growth for the industry by the end of 2024, reaching a total premium pool of USD 3.0 trillion. Similar growth of 2.7% is expected in 2025. Strong rebounds in growth should be visible in many key markets, with Western Europe and advanced APAC returning to premium growth.
A significant growth area for life insurance is the uptake of annuities to boost retirement savings. In the US, for example, sales of fixed-rate annuities jumped 63% in 2022 and 36% in 2023. Longer term, advanced markets are expected to contribute half of all additional premiums over the next 10 years, driven by strong growth in annuities.
For 2024, Swiss Re Institute forecasts that the combination of increased premium and increased investment income will boost profitability in the life sector, with the operating results across eight top markets increasing 15% for the year.
Ranking of insurance markets by total premium pool.
| Rank | Country | Total premium volume | Market Share | ||
| 2023* | 2024e | 2025f | 2023e | ||
| 1 | United States | 3,227 | 3,424 | 3,584 | 44.9% |
| 2 | China | 724 | 812 | 893 | 10.1% |
| 3 | United Kingdom | 375 | 401 | 420 | 5.2% |
| 4 | Japan | 363 | 370 | 382 | 5.0% |
| 5 | France | 283 | 292 | 303 | 3.9% |
| 6 | Germany | 245 | 255 | 264 | 3.4% |
| 7 | South Korea | 186 | 194 | 205 | 2.6% |
| 8 | Canada | 171 | 176 | 185 | 2.4% |
| 9 | Italy | 159 | 165 | 171 | 2.2% |
| 10 | India | 136 | 149 | 162 | 1.9% |
| 11 | Netherlands | 93 | 98 | 102 | 1.3% |
| 12 | Brazil | 84 | 92 | 98 | 1.2% |
| 13 | Spain | 83 | 88 | 92 | 1.2% |
| 14 | Taiwan | 78 | 80 | 84 | 1.1% |
| 15 | Australia | 74 | 76 | 79 | 1.0% |
| 16 | Hong Kong | 66 | 70 | 75 | 0.9% |
| 17 | Switzerland | 61 | 63 | 65 | 0.9% |
| 18 | Mexico | 45 | 50 | 54 | 0.6% |
| 19 | Denmark | 44 | 47 | 51 | 0.6% |
| 20 | Sweden | 44 | 45 | 48 | 0.6% |
“e”=estimated, “f”= forecast
*Data for 2023 is provisional for Canada, Switzerland, Hong Kong. Data for 2023 is estimated for US, UK, Japan, France, Germany, South Korea, Italy, India, Netherlands, Brazil, Spain, Australia, Denmark and Sweden.
Source: Swiss Re
