Hardening interest rates, lower inflation and improving economic conditions will provide a rebound in global non-life insurance premium growth in 2023 and 2024, according to a Swiss Re Institute report released on Thursday.
Real premium growth for non-life insurance will recover to 1.8% in 2023 and 2.8% in 2024, after weak growth of 0.9% in real terms this year, Swiss Re predicts.
Commercial lines are expected to benefit the most from rate hardening, with 3.3% growth in global commercial premiums in 2022 and a 3.7% increase in 2023.
Significant claims inflation in commercial lines will add new momentum to rate hardening over the next 12 to 18 months, Swiss Re said.
Rising construction costs in many countries and high and rising natural disaster losses following Hurricane Ian will put upward pressure on property lines, according to Swiss Re.
In the US, commercial real estate prices rose 8% year over year in the third quarter, up from 6% in the second quarter.
Swiss Re expects rising wages and healthcare costs in the post-pandemic world and ongoing social inflation to push up premium rates in 2023.
Compared to the trough in 2017, property prices are 60% higher, while the number of accidents is up close to 20%, Swiss Re said.
Going forward, Swiss Re expects the insurance industry to return to total premium growth of 2.1% annually on average in real terms in 2023 and 2024.
Higher interest rates should be a “silver lining” for insurers as inflationary pressures ease in 2023 and 2024 and are expected to improve medium-term investment performance and profitability, Swiss Re said.
Swiss Re forecasts global real GDP growth of just 1.7% in 2023 as inflationary recessions loom for major economies.