Kathmandu: Swiss Re expects insurance market premium growth to continue, driven by increased exposures, risk awareness and evolving client needs. According to Swiss Re Institute, non-life insurance premiums are expected to be 10% higher than the pre-COVID-19 level by the end of by the end of 2021 to USD 6.9 trillion and surpass USD 7 trillion in 2022 for the first time ever.
Heightened risk trends will increase the need for insurance protection, but also require a greater focus on evaluating and modelling, and ensuring pricing is adequate for the risks taken. Consequently, there is a greater need for insurance protection translating into a positive outlook for premiums as these will need to reflect increased exposures.
Swiss Re’s Chief Executive Officer Reinsurance Moses Ojeisekhoba said: ”There is a clear recognition that claims’ frequency and severity is rising as demonstrated by recent natural catastrophes or cyber incidents. This means the need for protection is growing, and the industry has important work to do in offering insurance and closing the protection gap.”
Climate change poses the biggest long-term threat to the global economy. According to Swiss Re Institute, the world economy is set to lose up to 18% of gross domestic product from climate change by 2050 if no mitigating actions are taken. Especially the risks from secondary perils, such as floods or wildfires, are growing, also driven by urbanization, exposing ever larger communities and assets to extreme climate events. Increased digitalization and interconnectedness are adding to the current risk landscape, for example in the area of cyber protection.
While climate change is a real threat, it also poses the largest growth opportunity to the industry as major investments will be necessary. According to Swiss Re Institute, to achieve the 2030 agenda for global sustainable development, investments in the order of USD 6.9 trillion a year will be required.
Inflation Risk
Re/insurers also need to prepare for elevated inflation risks. Consumer price inflation pressure is expected to remain high in the near term and medical and wage inflationary pressures, which are particularly relevant for non-life claims inflation, are expected to build up in the medium term. In addition, the social inflation trend in the US is likely to continue, driven by a litigious environment. Pricing must reflect these trends and anticipate higher claims activity.
Modeling Risk
Swiss Re’s Group Chief Underwriting Officer Thierry Léger said: ”As the risk landscape evolves and risks become more complex, there needs to be an even greater focus on evaluating and modelling these risk trends and ensuring pricing is adequate for the risks taken. Therefore, the importance of underwriting capabilities is further increasing, all the more given the persistent low interest rate environment. Accordingly, at Swiss Re we continue to focus on scientific, technology- and data-driven underwriting approach.”
