The insurance industry is to be affected by an expected slow global growth forecasted for 2023, an economic environment that will also bring new opportunities, according to MAPFRE Economics.
MAPFRE’s research arm expects economic growth to slow to 2%, seven tenths of a percentage point lower than the forecast in October of last year.
According to experts, this slowdown confirms the onset of a period of global stagflation characterised by weak economic growth and inflationary pressures that remain high, which will last at least until 2024, when GDP growth will rise to 2.7%.
MAPFRE stated that this economic environment will affect the performance of the insurance industry. Experts believe that the market will face greater difficulties in 2023 for business development, particularly in emerging countries, after a year in which the non-life sector saw significant growth.
At the same time, the tightening of monetary policy with higher interest rates will continue to boost the savings-linked life insurance business, at least partially offsetting the negative effect of the economic downturn on the insurance business.
In particular, experts estimate that 2023 may bring new opportunities in financial investments in the sector as the year progresses.
According to Ricardo González, Director of Analysis, Sectorial Research, and Regulation at MAPFRE Economics, the negative effect on the balance sheets of insurance companies due to the rise in bond rates and the performance of equities has been absorbed by the high solvency levels of the insurance industry, and the environment for life insurance savings business and traditional annuities with interest rate guarantees continues to improve.
Also improving is the outlook for the future profitability of investment portfolios, which is used by the insurance industry to supplement its technical profitability, bearing in mind insurance companies’ advantageous position in terms of high liquidity and low leverage owing to the characteristics of their business model.
