According to Swiss Re Institute’s latest sigma report, global non-life insurance profitability will be challenged significantly in 2022 by weakness in both underwriting performance and investment results.
Using a sample of the largest markets as a proxy for global profitability, analysts at the Institute estimate global non-life after-tax return-on-equity (ROE) at 3.4% in 2022, down from an average of 7.3% between 2017–2021.
However, Swiss Re expects a rebound in average global non-life ROE to 6.5% in 2023 and a 10-year high of 8.3% in 2024.
Meanwhile, real premium growth in non-life is expected to bottom out in 2022, with a slow recovery.
The Institute writes, “We forecast real premiums to grow 2.3% on average over the next two years (1.8% in 2023 and 2.8% in 2024), below the 2017–2021 average of 3.5%, as economic conditions take time to normalise.
“Nominal non-life growth should moderate in 2023–2024 as inflation comes down. We stress that there is more than the usual uncertainty surrounding our forecasts, amid volatile inflation and the impact of Hurricane Ian on claims, pricing and loss ratios.”
Macroeconomic headwinds are set to impact advanced markets the most, says Swiss Re, though it expects advanced EMEA to perform worst in 2022 and 2023. In that region, the Institute forecasts a 1.2% decline in non-life premiums in 2022 and a 0.9% increase in 2023, caused by a squeeze on household incomes, with also limited price hardening in 2022.
Despite underperformance in 2020 and 2021, Swiss Re institute see emerging markets premium growth outpacing advanced economies in the coming years.
This is chiefly due to their relatively strong pace of economic development and rapid growth in lines of business such as health, general liability and agro, it explains.
The Institute also notes that commercial lines, including workers compensation, will continue to benefit most from rate hardening and expand more than personal lines (excluding health) in the coming years. It estimates 3.3% growth in commercial premiums in 2022, and a 3.7% gain in 2023.
In contrast, Swiss Re expect personal lines insurance premiums to shrink by 0.7% in 2022, primarily due to poor performance in motor insurance in advanced markets.