Insurers set to recover quickly from COVID-19 hit: Swiss Re
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The global nonlife insurance sector will see a swift recovery in premium growth next year, driven by strong and broad-based rate hardening in commercial lines, Swiss Re Ltd. said Wednesday in a report.
Global nonlife premiums will grow by 1.1% this year and recover to an average annual growth rate of 3.6% in 2021 and 2022, the Swiss Re Institute sigma report said.
The outlook reverses its June forecast which predicted stagnating premiums.
“COVID-19 has impacted the insurance industry, although less so than we initially feared,” and insurance demand in advanced markets was better than expected, Swiss Re said in the report.
Advanced market nonlife insurance premiums are forecast to grow by close to 3% in both 2021 and 2022, led by Asia and the United States, the report said.
China will remain the fastest-growing market with premiums up an estimated 10% annually over the next two years, it said.
The upswing in rates has broadened across commercial lines in almost all regions with casualty business, which had remained soft until 2018, seeing rate hardening, notably in the U.S. and Europe, Swiss Re said.
“Market conditions from both the demand and supply sides point to continued pricing strength,” Andreas Berger, CEO of Swiss Re Corporate Solutions said in a statement.
“The low-interest rate environment and the ongoing social inflation in the U.S. will be key drivers of market hardening,” he said.
Nonlife insurer profitability is under pressure and the sector’s return on equity will slip to 5% this year, mostly due to lower investment returns, the report said.
“The outlook remains challenging. More COVID-19 related losses are likely this year,” the report said.
Swiss Re estimates total property/casualty market losses related to the pandemic in the range of $50 billion to $80 billion. Such an outcome would increase the combined ratio in commercial lines by 5 to 8 points, the report said.
More insurance and risk management news on the coronavirus crisis here.
